LedgerX has launched a new Bitcoin savings product designed to address the needs of investors wishing to buy and hold Bitcoin. The U.S Commodities Future Trading Commission has already certified the new product with swap execution facility (SEF) and derivative clearing organization (DCO) license. SEFs is a platform for financial swap trading that provides pre-trade information, e.g., bidding participants can also perform swap transactions.
LedgerX Bitcoin Savings Product
The new product will allow investors to earn a yield in fiat, on Bitcoin holdings, instead of just waiting for the price to appreciate. The Bitcoin savings interface is to be skewed to make it desirable for investors who wish to deposit and earn interest from their holdings.
The LedgerX Savings product will also allow investors to engage in call overwrite. Call overwrite allows people to deposit Bitcoin and to sell using call options once their prices rise. The volatility associated with Bitcoin is what makes it highly desirable for such overwrite trades.
The savings interface allows traders to select the implied rate and the number of Bitcoins they wish to earn a yield on, before submitting to LedgerX matching engine that powers the Bitcoin options product. The contracts are available for three and six-months duration.
“This interface will definitely be skewed to the long Bitcoin holders, who will likely only deposit Bitcoin and who will want to earn interest off of that Bitcoin,” said LedgerX Chief Operating Officer Juthica Chou.
Bitcoin Options Demand
According to Mr. Chou, they decided to create a Bitcoin savings account after discovering that people in the network were increasingly executing overwrites be it through very complicated processes. The company expects the product to record high activities, primarily from Bitcoin bears.
The unveiling of the new Bitcoin saving product should provide a significant boost to LedgerX which has experienced an increase in trading volume associated with options. Options currently account for nearly 70% of trading activities in the network with an average trade size of about $60,000. Over the last three months, the firm has averaged $30 million in notional transactions per month.
Over the past one month, Bitcoin users have shown signs of placing long and short bets of the cryptocurrency, which is currently valued at $149 billion. According to Chou 20% of the total volume since the product was launched has come in the past three weeks.
Options and Futures contract products pegged on cryptocurrencies have gained momentum in recent weeks. Chicago Mercantile Exchange has already teamed up with U.K’s digital service provider, Crypto Facilities to offer an Ethereum Reference rate and real-time index which many observers believe will pave the way for the unveiling of Ethereum (ETH) Futures contract.
Focus On Institutional Investors
LedgerX was the first company in the U.S to offer bitcoin derivatives. The Bitcoin Savings product should go a long way in strengthening the company’s prospects in the emerging cryptocurrency sector. It also provides a pathway for the company to target institutional investors that are increasingly flocking the sector.
The trading and clearing platform joins Coinbase another cryptocurrency exchange that has unveiled a slew of products with the aim of targeting institutional investors. Japanese holding company Nomura has also teamed up with Ledger to make it easy for high net worth investors to trade and hold crypto assets.
Investor confidence about cryptocurrency has shown signs of spiking high in recent months after a number of high profile investors showed signs of acquiring stakes in Bitcoin and cryptocurrency focused startups.