Derivatives Exchange Platform set to Offer Bitcoin Derivatives

TrueEX, one of the major players in the derivatives market is planning to make the move to the burgeoning bitcoin derivatives market. During an announcement on Monday, March 12, 2018, the company said that it wants to begin offering bitcoin as well as other cryptocurrency derivatives.

This comes as the latest in a series of highly successful moves made by trueEX CEO, Sunil Hirani in the financial market.

The company was founded in 2010 and has had great success in the derivatives market. Mr. Hirani has always set his sights on bitcoin and it appears that he is now ready to make his move into the volatile cryptocurrency market.

Examining the trueEX Bitcoin Derivatives Plan

As part of the announcement, trueEX revealed its outlook on the market especially with regard to the lack of a proper regulatory framework which serves as an incentive for institutional investment. As a result, the company wants to launch a regulated derivatives marketplace for bitcoin and other cryptocurrencies.

The company wishes to start out with bitcoin non-deliverable forwards (bitcoin NDFs). NDFs are quite popular in the forex market as it allows two parties to agree to pay each other a future amount that is based on the value of a currency pair.

While launching the bitcoin NDFs, trueEX also plans to form a partnership with ConsenSys in order to work out some sort of benchmark rate for ether, the second biggest cryptocurrency. Commenting on the proposed plan, Mr. Hirani described crypto NDFs are the “logical next step” when it comes to attracting institutional investors into the cryptocurrency market.

The bitcoin NDFs will be listed under the trueDigital brand which exists on the trueEX derivatives platform. The proposed plan is subject to review and approval by the United States Commodity Futures Trading Commission (CFTC).

Already, an FCM firm, ED&F Man Capital Markets has indicated its interest to provide prime brokerage services for bitcoin NDFs and other crypto NDFs that will be offered on trueDIGITAL.

According to Brooks Dudley, the VP of Risk at the firm expressed his optimism at the collaboration and praised Mr. Hirani for being a proven innovator in the finance market.

The Budding Bitcoin Derivatives Market

If trueEX gets CFTC approval, it will become the sixth US trading firm to enter into the crypto derivatives market within the past few months. Even with bitcoin currently floating at half the value it had at some point in December 2017, firms are still showing an eagerness to get into the market.

In December 2017, CME Group and Cboe Global Markets launched their bitcoin futures. Other players in the market include Cantor Exchange, Nadex, and LedgerX. Recently, Nasdaq also declared that it too was considering offering bitcoin futures.

The bitcoin derivatives market is still quite small when compared with the bitcoin market. Wall Street remains wary of the volatility of bitcoin and other cryptocurrencies as well as other risk factors like hacking of exchange platforms.

To put things in perspective, the average daily bitcoin transaction volume for last month was about $1 billion while the average daily volume for bitcoin futures was something in the region of $75 million.

Feature image by Virginia Sasser 

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