The future of crypto trading is futures

The future of crypto trading is futures

The boundaries between cryptocurrencies and traditional asset classes are blurring ever further, as established Wall Street players make trading digital assets part of their main business — and companies native to bitcoin push into mainstream markets.

The arrival of institutional investors into the $1.3tn digital asset market has meant the influence of big banks and professional traders has grown. As a result, the relationship between the price of mainstream assets, such as stocks and bonds, and crypto has tightened.

But, so far, the majority of these established investors can only trade derivatives of bitcoin, rather than cash contracts, which has concentrated the influence of Wall Street into futures markets and over-the-counter (OTC) contracts, such as ‘non-deliverable forwards’.

And this focus on derivatives has intensified competition from exchanges for a growing part of the digital asset world.

The influence of professional traders on the market is already noticeable, says Adam Farthing, chief risk officer for Japan at crypto-specialist market maker B2C2.

In recent weeks, cryptocurrency markets had one of their largest ever shake-outs after Tether, a leading stablecoin that should be valued in line with the US dollar, broke its peg to the currency. This sent reverberations through digital asset markets, wiping out billions of dollars