Fidelity, Bullish On Bitcoin Futures, Square’s Bitcoin Revenue Jumps

Fidelity, "Diversify Into Bitcoin", Square’s Bitcoin Revenue Jumped To $65.5Mil., Crypto ‘Winter’ Is Good For Bakkt And More (#GotBitcoin?)

Payments company Square reported its first-quarter earnings today, revealing strong growth in bitcoin sales through its Cash app. Fidelity, Bullish On Bitcoin Futures, Square’s Bitcoin Revenue Jumps

Square’s Bitcoin Revenue Jumped To $65.5 Million In Q1, Its Highest Ever

Founded by Twitter co-founder Jack Dorsey, Square reported $65.5 million in bitcoin revenue for the first quarter of 2019. Bitcoin costs, however, are listed at $64.7 million in the unaudited quarterly report, for a bitcoin profit of roughly $832,000.

Those figures top previous all-time highs for Square: The fourth quarter of 2018 saw $52.4 million in bitcoin revenue and $490,000 in profit.

Bitcoin profits in Q1 2019 represent an 80 percent gain over the prior quarter. For all of 2018, the company reported $166 million in bitcoin sales.

Still, bitcoin remains a niche product for Square. Transaction-based revenue in Q1 topped $656 million, according to the report.

The company sells bitcoin to users through its Cash app, a service that expanded to all 50 U.S. states in August 2018.

Crypto ‘Winter’ Is Giving Bakkt’s Bitcoin Futures Plan a Boost, ICE Chief Says

Crypto winter has been a boon for highly-anticipated bitcoin futures exchange Bakkt, an executive from its parent firm said Thursday.

Jeffrey Sprecher, CEO of Intercontinental Exchange (ICE), said during the company’s Q1 earnings call that the ongoing bear market has been “helpful” for Bakkt, which was initially scheduled to launch last December, then delayed to January, then again indefinitely.

“It’s really been helpful that the cryptocurrency [market] went into what they call a winter, [because] it took some of the heat off the timetable to launch,” Sprecher said, adding that this was just one benefit.

Another benefit is that many crypto startups’ valuations have declined, creating buying opportunities for Bakkt, he said, explaining:

“We’ve actually been looking at a number of different companies and acquired a company earlier this week that wouldn’t have been available to us if the market was really hot, because the valuations were really hot.”

Indeed, on Monday Bakkt announced it had acquired Digital Asset Custody Company (DACC), which is developing a crypto-asset storage platform. (The price was not disclosed.)

That being said, the industry is continuing to mature, and Bakkt is working to help it do so, Sprecher said. The company has brought on a number of engineers through its recent acquisitions (Bakkt has also acquired some assets, including personnel, from Rosenthal Collins Group, an independent futures commission merchant).

“There’s a lot of interest still in this market,” he said.

Regulatory Questions

One of the primary causes for Bakkt’s delays are regulatory in nature – specifically, it is widely believed that the firm’s plan to custody bitcoin itself under federal supervision and settle contracts through its parent firm’s clearinghouse have placed it in a regulatory gray area.

While Sprecher did not specifically address what the holdups were, he did note that regulators are still trying to understand the asset class and how to regulate it.

“You can’t really get into the true institutional markets that we serve without being highly regulated and highly trusted so the juice is worth the squeeze,” he said, adding:

“It’s going well now, there were a lot of things that had to get sorted out with jurisdiction and custody and … banks and those issues that in my mind need to be resolved before adoption of the asset class and we’ve been at the forefront of [this].”

The bear market has helped in this sense as well, by giving both regulators and legislators in the U.S. some additional time to determine how they might eventually regulate this space, Sprecher said.

Sprecher did not address how much ICE has spent on Bakkt to date, though Scott Hill, chief financial officer at ICE, previously said that the firm planned to invest between $20 and $25 million in 2019. This figure comes on top of $182 million Bakkt raised from investors.

22% of Institutional Investors Have Some Digital Asset Exposure: Fidelity

Institutional investors are increasingly open to finding a place for digital assets in their portfolios, suggests new research.

A survey conducted by Fidelity Investments and published Thursday found that, already, around 22 percent of investors have some exposure to digital assets, while 40 percent say they are open to taking the plunge in the next five years. Of those that have exposure, most investments were made in the last three years.

Aimed to gain an understanding of how institutions, financial advisors and investors perceive digital assets generally and as part of an investment portfolio, the survey also found that over half (57 percent) prefer to invest in digital assets directly, while 72 percent favor investment products that hold digital assets. Fifty-seven percent said they’d prefer to buy investment products that hold digital asset firms.

For the research, the company said it polled over 400 U.S. institutional investors, including pensions, family offices, crypto and traditional hedge funds and financial advisors, as well as endowments and foundations.

“We’ve seen a maturation of interest in digital assets from early adopters, like crypto hedge funds, to traditional institutional investors like family offices and endowments,” said Tom Jessop, president of Fidelity Digital AssetsSM, a provider of institutional custody and trading services for digital assets.

Jessop continued:

“More institutional investors are engaging with digital assets, either directly or through service providers, as the potential impact of blockchain technology on financial markets – new and old – becomes more readily apparent.”

Regarding the appeal of digital assets to investors, the survey further found that the “characteristics” of digital assets had the widest appeal, with 74–80 percent citing that option. Just under half (47 percent), meanwhile, said digital assets appealed as an innovative technology, and 46 percent pointed to a low correlation to other assets.

On the negative side, price volatility, lack of regulatory clarity and a lack of fundamentals were seen as obstacles to investment.

“Price volatility, which was a primary concern of survey respondents, may dampen as the underlying custody, trading and financing infrastructure continues to develop in a direction that traditional market participants are familiar with.” Jessop said.

CFTC Chair: ‘Explosion of Interest’ In Crypto May Spawn New Clearinghouses

The U.S. Commodity Futures Trading Commission (CFTC) expects to see more companies apply to become federally-regulated clearinghouses as a result of growing interest in cryptocurrencies.

Chairman J. Christopher Giancarlo, testifying on “the state of the CFTC” before the U.S. House Agriculture Committee on Wednesday, said in his opening remarks that the clearinghouses his agency regulates are “critical single points of risk in the global financial system” which continue to grow and become more complex.

Clearinghouses are financial institutions that facilitate transactions between two parties, acting as intermediaries to ensure trust on all ends. The CFTC routinely examines these entities to identify any possible issues that may affect their ability to monitor or control their risks, Giancarlo told lawmakers. “The importance of these examinations to overall financial stability are all increasing.”

The agency regulates a number of registered clearinghouses within the U.S., as well as six located overseas and has exempted four foreign clearinghouses. This number will grow, Giancarlo said – especially with the introduction of crypto futures.

He added:

“The Commission anticipates new applications for clearinghouse registration resulting from the explosion of interest in cryptocurrencies; an area in which protection of the cryptocurrencies will be one of the highest risks.”

Crypto derivatives provider LedgerX operates as a clearinghouse already, while platforms like ErisX are still waiting for the CFTC to approve their applications to become derivatives clearing organizations (DCOs), which is a necessary designtation to operate as a clearinghouse.

Market intel
Giancarlo also addressed LabCFTC, the regulator’s fintech research group created to keep up with changing technology.

During his remarks, the Chairman highlighted blockchain and cryptocurrencies as two aspects of “rapidly changing markets and technological developments.”

LabCFTC was able to help the regulator anticipate some of this development and what an appropriate regulatory response might be, he said.

In particular, the CFTC has been able to independently analyze market data “without being reliant on self-regulatory organizations and market intermediaries,” he said.

Moreover, the CFTC was able “to determine the value of technological innovations,” he said, citing “crypto-asset-based futures products” as an example.

CME and Cboe both announced they were launching cash-settled bitcoin futures products at the end of 2017, and ErisX, LedgerX, Seed CX and Intercontinental Exchange’s Bakkt all plan to offer physically-settled bitcoin futures and forwards once they’ve achieved the necessary regulatory approvals.

Updated: 12-26-2019

Bitcoin Fixed Supply Means Futures Aren’t A ‘Threat’ To Price — PlanB

The Bitcoin (BTC) price analyst who created one of the industry’s best-known prediction models thinks futures markets will not undermine the cryptocurrency.

In a Twitter debate on Dec. 26, PlanB, father of the Stock-to-Flow tool, dispelled fears that Bitcoin futures markets could negatively impact price.

‘Inelastic’ Supply Preserves BTC

“I don’t see futures as a threat to #bitcoin,” he summarized.

The comments follow months of speculation about futures in light of Bakkt’s offering going live in September this year. Days after launch, Bitcoin markets fell significantly, leading to widespread theories of futures manipulating markets.

At the time, Bakkt responded by arguing that its product was aiding price discovery. Volumes were nonetheless much lower than expected — existing futures from CME, for example, traded over $500 million per day in May. The underwhelming performance thus added to the suspicion that futures’ market impact was not wholly organic.

For PlanB, however, Bitcoin’s nature means that it cannot suffer similar problems to precious metals when it comes to trader speculation. He continued:

“Central banks can future sell large amounts with unlimited fiat money, pushing future prices below spot (backwardation), but spot markets will not follow all the way, because they run out of sellers (unlike gold, supply is inelastic).”

Stock-to-Flow is a measure of the amount of Bitcoin currently in existence — the stock — versus the “new” coins coming into circulation — the flow. The data has already highlighted that by 2025, Bitcoin’s Stock-to-Flow ratio will overtake that of gold.

He has also demonstrated the extent to which Stock-to-Flow drives market value.

Futures Panic Unfounded?

PlanB referenced a debate with Twitter user BitcoinTina, well known as a dedicated proponent of Bitcoin.

While the latter noted various differences between the cryptocurrency and gold or silver as regards futures, in essence, the pair agreed that Bitcoin’s fixed supply meant that attempts to infiltrate futures markets would fail to produce long-term impact.

“…I was talking about spot and futures prices (‘discovered’ at exchanges) that in case of commodities influence producers/supply, but not with bitcoin,” PlanB added in a summary of his argument.

As Cointelegraph reported, others have voiced concerns about futures. Those continued as recently as last month when Andreas Antonopoulos said cash-settled futures could depress the Bitcoin price.

Prior to that, criticism focused on futures that do not see “delivery” of Bitcoin at all. Unlike with Bakkt, those futures traders need not take custody of cryptocurrency, and hence do not learn about its differences to fiat and the responsibilities those entail.

Even in Bakkt’s case, as analyst Alex Krueger noted earlier in December, few participants choose to take custody of BTC, instead of rolling over their contracts as with regular futures contracts.

Updated: 1-31-2020

CME Bitcoin Futures Hit $100B In Volume Since 2017, Director McCourt Says

The Chicago Mercantile Exchange, or CME, has hosted over $100 billion in volume for its Bitcoin futures trading product.

“CME Bitcoin futures have surpassed $100 billion in total notional value traded since their launch in December 2017,” CME Group Managing Director and Global Head of Equity Index Alternative Investment Products, Tim McCourt, told Cointelegraph.

Institutions Join Crypto

During the crypto boom of 2017, mainstream financial entities began moving into the industry.

In December 2017, at the peak of Bitcoin’s all-time price high, CME launched its cash-settled Bitcoin futures trading product. CME’s market entrance came just one week after the Chicago Board Options Exchange, or CBOE, launched a similar cash-settled Bitcoin futures trading product.

“Our Bitcoin futures have evolved over the last two years and are now one of the most liquid, listed bitcoin derivatives available globally,” McCourt said.

In contrast, CBOE discontinued its Bitcoin futures trading product in March 2019, after a lengthy bear market consumed the prior year.

Progress Continues

Despite losing institutional crypto participation from the CBOE, the crypto industry has since gained other mainstream involvement.

The Intercontinental Exchange, or ICE, launched physically-settled Bitcoin futures trading through its Bakkt platform on Sept. 23, 2019. Bakkt also opened Bitcoin options trading on its cash-settled Bitcoin futures in December 2019.

The market is apparently very interested in CME’s Bitcoin futures, evident in this new massive volume benchmark. “We continue to see strong participation from institutional investors, physical bitcoin traders and other clients who value the transparency, price discovery and risk transfer that only a regulated marketplace like CME Group can offer,” McCourrt said.

Cointelegraph covered CME’s Bitcoin options trading unveiling earlier in 2019.

Updated: 2-3-2020

Bitcoin Futures: Volatility ‘Coming’ as BitMEX Hits $1B Open Interest

Bitcoin (BTC) futures are fast becoming the darling of institutional investors as open interest spikes 60% since the start of 2020.

Data from monitoring resource Skew Markets shows that open interest across major futures offerings from exchanges now stands at more than $4 billion.

BitMEX, OKEx Futures Open Interest Passes $1B

Over half of that stems from two companies — derivatives giant BitMEX and crypto exchange OKEx — both of which now have open interest in excess of $1 billion.

On Monday, fellow platform Deribit confirmed month-on-month Bitcoin futures options turnover was surging 70%.

The latest data caps an extraordinary month for Bitcoin futures, which have accompanied price gains of almost 35% this year.

As Cointelegraph reported, the global volume has also expanded in recent weeks to challenge previous records. On a single day last month, futures markets exchanged more than $25 billion.

Melker: BTC Move Likely “Significant And Soon”

Now, anticipation is building for a knock-on effect to boost BTC/USD even higher as markets look likely to test $10,000.

“With Bitmex Open Interest hitting a billion, volatility is almost assuredly coming,” Cointelegraph Markets analyst Scott Melker summarized in a tweet on Sunday.

“We aren’t staying at 9400 for long. The next move should be significant and come relatively soon.”

Bulls Double Down On Price Gains

Melker is far from alone in eyeing a bullish short-term trajectory for Bitcoin. The impact of May’s block reward halving — now less than 100 days away — is already a hot topic among commentators.

Thereafter, calculations point to a bull run which should take BTC/USD to $100,000 by 2022.

Speaking to Cointelegraph late last week, two well-known crypto YouTubers threw their weight behind the forecast, arguing the bull cycle which would take Bitcoin there had in fact already arrived.

Updated: 2-12-2020

Bitcoin Price Tackles $10.4K Level As Futures Markets Hit 5-Month High

Bitcoin (BTC) tried to clear fresh key resistance at $10,400 on Feb. 12 as its rebound, which began on Tuesday, continued to produce surprises.

BTC Posts 7% Daily Gains

Data from Coin360 and Cointelegraph Markets showed BTC/USD briefly hit local highs of $10,495 on Wednesday. This capped a highly successful 24 hours for the pair, which just a day earlier traded at close to $9,700.

At press time, Bitcoin was hovering just below the new local highs, trading at $10,340, still up almost 6%.

Fears had arisen of a fresh dip for markets, with traders bracing themselves for further potential losses. In his latest analysis, Cointelegraph Markets trader Michaël van de Poppe warned that $10,400 was crucial to staving off such losses.

“The range is defined by the resistance at $10,400 and the possible lower support zones at $9,500 and $9,800. If the price can’t break the $10,400 area then it will then likely pull back to retest this area,” he summarized.

Meanwhile, Bitcoin futures reached their highest since September, with CME’s product coming within a shade of $10,600. On Monday, Bitcoin filled another “gap” left by the pause in futures trading over the weekend.

Stock-to-flow Overshoot Hits 20%

Others remained bullish about the mid-term outlook, Cointelegraph reporting on optimism from figures such as Fundstrat’s Tom Lee, who believes Bitcoin will hit $40,000 before the Dow Jones hits 40,000.

Within the next six months, he recently added, Bitcoin could hit new all-time highs of $27,000 thanks to the price beating its 200-day moving average.

At current levels, Bitcoin is now over 20% higher than its predicted average according to the stock-to-flow price model. This has the potential to be significant, as stock-to-flow has historically almost perfectly tracked fluctuations in BTC/USD.

The model’s creator, PlanB, this week nonetheless stated that the pair would be above $10,000 in May, at the time of Bitcoin’s block reward halving.

The Renowned Analyst Also Predicted:

“2021: bull run starts after the halving and tops $100k before Dec 2021.”

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