Connect with us

Blockchain

CME’s Futures Options Sprinted Out of the Gate but a Marathon Lies Ahead

Published

on

In the two years since it launched cash-settled Bitcoin futures, CME has firmly established itself as a leader in the regulated crypto derivatives space despite not always being the first to market. In December 2017, it launched regulated Bitcoin futures a week after rival exchange CBOE. However, it only took 15 months for CBOE to completely withdraw from the market. By August, CME had announced record highs for Bitcoin futures trading.

Most recently, Bakkt came into the market ahead of CME with its regulated options on Bitcoin futures. However, after successfully launching its own options contracts on Jan. 13, it seems that the Chicago-based CME is once again emerging at the top of its game.

When the CME options contracts made their debut on Monday, the company saw opening-day trading volumes over $2.3 million, more than five times that of major competitor Bakkt, which traded just over $380,000.

According to data aggregated by Skew, the CME volumes are still far below that of Deribit, which traded $34.5 million in options on the same day that CME launched its options product. However, it’s worth noting that until mid-2019, Deribit was the only exchange offering crypto-backed options. Nevertheless, CME chief told Cointelegraph the following day that his firm was “very pleased” with the opening-day performance:

“We know from experience that successful options products require a robust, liquid underlying futures market. Our CME Bitcoin futures have become one of the most liquid, listed Bitcoin derivatives products in the world over the past two years.”

Second-day options trading on CME was slightly slower, with $730 million in volume according to Skew. Perhaps that’s to be expected, as investors keen to participate would have bought into CME options on the day of the launch.

Eager anticipation?

In the leadup to Jan. 13, CME saw a surge toward Bitcoin futures. The first four trading days of 2020 showed that interest was up by almost 70% compared with 2019’s year-end. J.P. Morgan analysts were quick to attribute this increase to the upcoming options launch, stating it was “highly anticipated.”

The reason for the excitement could be attributed to the fact that the asset underlying the CME options vehicle isn’t Bitcoin (BTC) itself, but Bitcoin futures. Options provide traders with the opportunity to hedge their risk on the underlying asset, and futures are inherently risky. Therefore, the upcoming ability to hedge may explain why so many traders were eager to get their hands on the underlying asset.

CME continues to outperform main rival Bakkt

The difference in the way that the underlying futures instruments are settled could also account for why CME so significantly outperforms Bakkt, both in futures trading and now in options on Bitcoin futures. For example, during last week’s run on futures, Bakkt traded $43 million compared to CME’s $702 million on Jan. 8, which was the busiest day according to Skew data. Nevertheless, Bakkt maintains confidence in the markets and its offering, as the firm’s spokesperson told Cointelegraph:

“We continue to see strong interest from our growing base of customers in our Bitcoin futures and options complex, which offers a broad range of options for interacting with and hedging positions in digital assets.”

Until December, Bakkt only offered physically-settled Bitcoin futures contracts, whereas CME has always settled its contracts in cash. Although physically-settled futures were hotly anticipated, they could account for why Bakkt had an arguably sluggish start after its launch in September.

Cash vs. physical settlement

The trading volume differential between CME and Bakkt when it launched indicates that institutions prefer their Bitcoin futures to be settled in cash. This makes sense given that cash-settled contracts avoid the need to take custody of the Bitcoins themselves. Although crypto custodial services are now far more widely available, many institutions will still find it easier to operate in fiat currencies.

Toby Joy, head of U.S. trading at trading and options market-making firm Akuna Capital, agrees, although he also thinks security is a critical consideration. He told Cointelegraph:

“CME’s options offering is more palatable to institutional investors that aren’t yet comfortable with the crypto environment because the futures and options are cash-settled. This means one can speculate on the direction of Bitcoin without ever having to touch a coin — that’s a big deal for people and firms who worry about security.”

However, Paul Eisma, head of trading at XBTO Group, a crypto finance company, is more bullish on physically-settled products. Speaking to Cointelegraph, he said that both onshore regulated contracts have the ability to succeed because “they offer different value propositions and choices to prospective investors,” adding:

“CME’s cash-settled product has an expiration cycle that lines up with Deribit, the primary institutional and retail crypto options market. Flows and hedges will naturally gravitate from these ‘almost’ fungible contracts. Bakkt’s physically delivered futures product requires onboarding onto a regulated warehouse. This poses a unique custodian value proposition and an onboarding qualification threshold.”

Bigger picture — different story?

After taking a macro view of the markets over the last few days beyond comparing regulated exchanges, perhaps CME’s performance isn’t so extraordinary. The two highest-volume futures trading days of the previous month across all exchanges were Jan. 8 and Jan. 14.

On each of those two days, the three biggest futures exchanges by volume — OKEx, Huobi and BitMEX — all saw 30-day highs, according to data. This suggests that overall across retail and institutional platforms, the appetite for futures has been high over the past week, meaning CME’s options launch is likely not the only factor at play.

The price of Bitcoin has also been climbing at a startling pace since the first full trading week of the new year. However, it’s notable that it peaked at around $8,300 on Jan. 8 — the first of the two highest futures trading dates. On Jan. 14 alone, it rose over $600.

The markets are currently awash with speculation about what drove this recent bull run. Two major contributing factors are likely to be the uncertainty over U.S.–Iran relations, pushing investors away from stocks and fiat currencies. The upcoming Bitcoin halving and subsequent squeeze on supply are also in contention. 

However, it also seems likely that excitement over CME’s launching its options product does at least partially account for Bitcoin’s meteoric rise. Ben Zhou, founder and CEO of crypto exchange Bybit, believes that CME’s options launch has played a significant part in Bitcoin’s recent price action: “Introduction of Bitcoin options is a game-changer.” In a conversation with Cointelegraph, he went on to say:

”Just as the introduction of Bitcoin futures in 2017 had an impact on Bitcoin’s price, it seems that the introduction of Bitcoin options has done the same. The more financial products there are for Bitcoin, the healthier the market is.”

Source: https://cointelegraph.com/news/cmes-futures-options-sprinted-out-of-the-gate-but-a-marathon-lies-ahead

Blockchain

Lawyers Duke it Out Over Who Gets To Lead the Class Action Suit Against Tether

Published

on

In a U.S. courthouse for the Southern District of New York, Judge Katherine Failla heard this afternoon from three plaintiff teams suing iFinex et. al. and vying to serve as lead counsel in the emerging class action with potentially tens of thousands of injured members.

IFinex’s Tether (USDT) stablecoin firm and its Bitfinex subsidiary are charged with manipulating the Bitcoin market in 2017 — something the firm strenuously denies.

Kyle Roche, representing plaintiffs Leibowitz et. al., argued that his firm Roche Cyrulnik Freedman LLP was the first to investigate the alleged market manipulation, the first to file a complaint, and also possessed the top cryptocurrency expertise. “Cryptocurrency is unique,” said Roche, “the law is new, and this case presents difficult definitional issues.”

The case should not be limited to Bitcoin issues alone, he argued; it should include other cryptocurrencies like Ether that may have been harmed by the alleged pump-and-dump scheme.

“Cryptocurrency really works as one market. People who purchase one cryptocurrency often buy many, especially in a bubble” as occurred  in the summer of 2017, said Roche. He referenced page 43 of the so-called Griffin paper, introducing it into evidence.

That academic paper, Is Bitcoin Really Un-tethered? by John M. Griffin And Amin Shams, was posted in June 2018 and later updated. It investigated whether Tether influenced Bitcoin and other cryptocurrency prices during the 2017 boom. The authors found that that purchases with Tether were timed following market downturns and resulted in “sizable increases in Bitcoin prices.” This paper became a foundational piece of research for all four subsequent lawsuits.

Many in the crypto community have long been skeptical that Tether is actually backed by the U.S. dollar at a one-to one ratio as claimed. The Griffin paper also found “insufficient Tether reserves before month-ends.”

The Griffin paper showed, said Roche, that the price of Bitcoin was going down before Tether’s issuance, but after Tether was issued the price of Bitcoin went up — and this happened with six other crypto currencies as well.

Attorneys pit research against experience

Karen Lerner of Kirby Mcinerney LLP, representing plaintiffs’ Young, Kurtz, Crystal et. al., argued that a different kind of experience was more important in an action of this kind. “We are class action lawyers, and we are antitrust and commodities lawyers.” And, she contended, that even though they weren’t the first to file a complaint, their work was the most original, with an extensive regression analysis that identified 115 specific dates when market manipulation occurred and 256 actual transactions. Their firm’s proprietary algorithm would show “a lockstep pricing relationship between spot Bitcoin and Bitcoin futures,” she argued.

Brian Cochran, an attorney with Robbins Geller, representing plaintiff Ebanks et. al., questioned the Roche firm’s unique crypto expertise. “He says his one crypto case in Florida gives them more expertise than my two crypto cases — which were class actions.”

Who gets to sue Tether?

More significant, perhaps, Cochran criticized the class size proposed by the other law firms. “Roche defined it as anyone who owned crypto over the last six years. That’s overwrought — much too broad. Bitcoin and Bitcoin futures are closer to my definition of the class. Not all cryptos should be included.” That would simply be taking money from real victims and giving it to others.

As might be gathered, there were many lawyers in attendance for the oral arguments: 12 attorneys represented the four plaintiffs, while the defense team sent three attorneys just to observe — with space at a premium, several lawyers had to take seats in the jury box. As the session neared conclusion, Judge Failla said, “I had hoped to decide the motion today, but you made my decision very difficult.” She promised a decision on Thursday at 4pm EST.

Source: https://cointelegraph.com/news/lawyers-duke-it-out-over-who-gets-to-lead-the-class-action-suit-against-tether

Continue Reading

Blockchain

PewDiePie Is Guilty of Every Attack He Hypocritically Aims at Jake Paul

Published

on

  • PewDiePie trashed fellow YouTuber Jake Paul’s new financial freedom courses in a recent video.
  • But Felix is guilty of shilling sketchy financial products too.
  • To top it off, PewDiePie gives financial advice in the video, while criticizing Jake Paul for not having any credibility to give financial advice.

PewDiePie wasn’t back on YouTube for long before running out of ideas for original content. So he piggy-backed off another YouTuber’s original work instead.

His response video to Jake Paul’s financial freedom movement isn’t the first time Kjellberg has attacked his fellow YouTuber’s efforts to make the world a better place. The king of gaming YouTube has a longstanding beef with both Jake and Logan Paul.

jake and logan pauljake and logan paul
PewDiePie has a longstanding beef with the Paul brothers. | Source: Michael Reaves/Getty Images/AFP

Last year, he even stooped as low as bashing Jake Paul’s petition to end cyberbullying.

PewDiePie has expressed consternation in the past with a media that nit-picks over his channel and allegedly blows anything negative out of proportion.

But he’s doing the same thing to Jake in this recent video.

Felix Shilled Scammy Cryptos

Just last month, Felix shilled sketchy cryptocurrency projects to his audience for affiliate revenue at the beginning of a video.

He even acknowledged with a joke how greedy it was to include an ad in a video that already had ads on it:

Many people have lost millions to crypto scams in the last decade while hoping to get rich. PewDiePie leveraged his fame and the trust of his fans to push more scammy cryptos. Yet he criticizes Jake Paul for encouraging people to educate themselves about finance and business.

He even made fun of another shady crypto scam in 2018, before selling out to TRON, BitTorrent, and DLive.

PewDiePie Mocks Jake Paul for Giving Financial Advice… Then Gives Financial Advice

As if that weren’t astounding enough, PewDiePie is actually guilty of what he slams Jake Paul for within the same video that he upbraids Paul. It’s unbelievable.

Pewds mockingly says:

Yes, Jake Paul is the person I look at when I envision financial freedom.

Then laughs.

But why not?

pewdiepie, jake paulpewdiepie, jake paul
PewDiePie is more like Jake Paul than he wants to admit. | Source: PewDiePie/YouTube

Paul is in his early 20s, and he’s a multi-millionaire. That actually makes him at least credible, if not authoritative, as a source of business and financial advice.

While PewDiePie doesn’t think Paul’s YouTube success translates to financial savvy, he instantly turns around and starts giving financial advice:

Student loan is the cheapest loan you can ever get. It’s one of the most fair loans. It’s a great loan to actually take advantage of.

That was in response to Jake Paul criticizing student loans for costing so much and not delivering students the earning power that would make them worth it.

But Jake Paul is right. And PewDiePie is wrong.

Job pay hasn’t kept up with the ballooning costs of loan-financed college education. And one markedly unfair aspect of student loans is they are notoriously difficult to discharge in bankruptcy.

PewDiePie concludes:

Jake Paul is the kind of celebrity that doesn’t have any real value… You could replace Jake Paul with anything or anyone and it wouldn’t make a difference.

Honestly, how special is it to play Minecraft and laugh at memes?

PewDiePie is even more “guilty” than Jake Paul of this final criticism.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.

This article was edited by Josiah Wilmoth.

Source: https://www.ccn.com/pewdiepie-is-guilty-of-every-attack-he-hypocritically-aims-at-jake-paul/

Continue Reading

Blockchain

Secretive Digital Fiat Project Emerges With New Partner as CBDC Chatter Grows

Published

on

As central bank digital currencies (CBDCs) march into view, a privately-run version of digital fiat is adding a key tech partner.

Utility Settlement Coin (USC), the blockchain-based payments system involving commercial and central banks, will be working with ConsenSys-backed startup Adhara, CoinDesk has learned. Adhara was behind Project Khokha, which used enterprise blockchain client Quorum to see how zero-knowledge proofs performed with the South African Reserve Bank (SARB).

The move is one of only a handful of public overtures by Fnality, the company that oversees the development of USC. Fnality raised $64.5 million in June 2019 from 14 shareholders including banking giants Barclays, Santander, BNY Mellon, ING and others.

“We think adding Adhara is going to really help us. They’ve got experience of doing some of this type of stuff in other places,” said Fnality CEO Rhomaios Ram.

The sensitive nature of Fnality’s discussions with central banks means it likes to keep a low profile. To date, USC’s only known technology partner was London-based Clearmatics Technologies. (Clearmatics, which uses a fork of ethereum, played a key part in the inception of USC, along with Swiss lender UBS, back in 2015.)

“At Fnality we are pursuing a multi-partner strategy,” Ram said. “Part of that is associated with risk and part of that is associated with we want more people involved in this ecosystem.”

The USC is commercial bank money, as opposed to a pure CBDC, which is issued and backed by the domestic central bank and carries sovereign risk. However, the design of USC allows it to carry some of the characteristics of central bank money because the cash collateral backing the USC is held at a domestic central bank.

As stated in a mandate to its shareholder commercial banks, Fnality’s plan is to represent five currencies on its blockchain – USD, euro, JPY, GBP and CAD – and solve the so-called “cash on ledger” problem, allowing wholesale banking transactions to happen instantly, cross-border and 24/7.

An industry source close to Fnality said adding Adhara makes sense because the work the startup has already done in South Africa could evolve into a Fnality payment system. The Swiss National Bank (SNB) was also mentioned by the source as a possible custodian of Fnality’s tokenized cash.

Asked if SARB was going to be in the cards when it comes to including more central banks within Fnality, Ram said: “We can’t look ahead that far. Our mandate from our investors is to focus on the five [currencies] and then, depending on how successful we are with those five, we will come to the others as and when, depending on what our investors say at that time.”

Ram acknowledged that CBDCs have risen on the agenda since his company’s June 2019 fundraising, adding that Fnality has held “very casual, informational conversations with some people,” but he had no idea what their intentions were or whether it was just educational. 

Neither SARB nor SNB returned requests for comment.

The Libra effect

The landscape has changed dramatically regarding central banks and digital currencies thanks to Facebook’s audacious plans for its Libra stablecoin. 

A key question for any large-scale, privately-backed initiative in this area now is whether Libra was a good or a bad thing.

A positive scenario is that central banks now move more quickly on initiatives like USC; another possible outcome is the central banking fraternity actively discouraging private-sector experiments from encroaching any further into the territory of the state. 

Ram agreed that Libra cut both ways. “It was literally both good and bad,” he said. “It was good because obviously these types of things gather a lot of attention and people that didn’t take us seriously before started to. But at some level, if you are not in the detail of this, it all looks the same. That can be a good or bad thing.”

John Whelan, Santander Bank’s innovation chief who is also on the board of Fnality, said it was not a question of competing with CBDCs at all.

“We see these things as entirely complementary and it’s quite likely given the regulations and the impact potentially on monetary policy … that something like Fnality will come into existence [before CBDCs]. But they are totally compatible,” said Whelan.

In light of Libra, Ram was philosophical about possible outcomes for Fnality’s ambitious plan to tokenize fiat held in the coffers of major central banks. 

“If the only thing that this [Libra] does is force the conversation and force some speed up on CBDCs – from a personal perspective that might not be great – but from the investors’ perspective that might still work for them [Fnality’s shareholder banks],” he said.

2020 vision

Fnality’s task, to create a regulatory framework and rulebook that five large central banks can digest, is ambitious in itself, nevermind coordinating the build of the various parts of the stack plus all the integration work that has to be done. 

A second source familiar with the project said Fnality’s strategy regarding its contracting framework and execution plan seemed “quite confused.”

“Whenever you have a lot of people involved in something – and they’ve grown their headcount quite aggressively – if you don’t have a clear program and execution plan at the beginning, there’s a natural tendency to kind of end up going all over the place,” the source said.

Regarding the scale of the organizational challenge, Ram said: “That is kind of the special sauce of Fnality, organizing all of these different stakeholders. That’s what we are aiming to be good at – that and driving all the legal and regulatory.”

The plan announced with last year’s fundraising was to come out with one of the main five currencies on the network by the end of 2020. 

“We have got no reason to change our minds yet. So all looks still possible,” Ram said.  

Disclosure Read More

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source: https://www.coindesk.com/secretive-digital-fiat-project-emerges-with-new-partner-as-cbdc-chatter-grows

Continue Reading

Trending