In Thursday's edition of The Daily, we focus on stories showing cryptocurrency exchanges continuing to develop advanced services designed to attract institutional investors, including OTC trading, derivatives, and futures. The moves signal a deepening integration between traditional finance and digital assets.
Coinbase Launches Dedicated OTC Desk
Coinbase has launched an over-the-counter (OTC) trading desk, which went live earlier this month exclusively for its Prime members, including hedge funds and other agency-level businesses. These high-volume clients can now trade cryptocurrencies via direct communication methods such as Skype, email, and phone, as is common for OTC desks in other markets. “We launched our OTC business as a complement to our exchange business because we found a lot of institutions were using OTC as an on-ramp for crypto trading,” said Christine Sandler, head of sales at Coinbase, in an interview with Cheddar. “We felt this was a huge benefit to our clients to actually leverage both our exchange and our OTC business.” Unlike other OTC desks, Coinbase claims it is not a counter-party in the deals it helps clients complete. The company plans to eventually offer delayed settlement and perhaps integrate this with its custodial service.
Huobi Opens Crypto Derivatives Market
Huobi announced on Wednesday, Nov. 28, it has opened a cryptocurrency derivatives market in beta, now available in selected countries. The contracts enable traders to buy or sell at predetermined prices on a weekly and quarterly basis. The Huobi DM exchange offers up to 20x leverage and includes investor protections such as a 20,000 BTC insurance fund against catastrophic security failures. “Cryptocurrency is a rapidly expanding and maturing market,” said Joshua Goodbody, General Counsel of Huobi’s Global Institutional team. “As part of that maturation, we see more and more sophisticated investors and traders from more established financial markets looking to gain exposure, including institutional players. At the same time, we think many experienced, successful cryptocurrency traders are looking for a broader range of investment tools than has traditionally been available. Huobi DM is tailor-made to address these sorts of needs.” The platform is not currently available to users from the U.S., Singapore, Israel, Iraq, Hong Kong, Cuba, Iran, North Korea, Sudan, Malaysia, Syria, Eastern Samoa, Puerto Rico, Guam, Bangladesh, Ecuador, and Kyrgyzstan.
Nasdaq Teams Up With VanEck on Futures
Just as cryptocurrency exchanges are looking to attract institutional traders, traditional operators are setting their sights on crossing over to the other side. Nasdaq now plans to launch regulated bitcoin futures-type contracts in the first quarter of 2019, due to a partnership with MV Index Solutions, a VanEck company with about $14 billion invested in its products, which last week launched an OTC Spot Index. The cooperation was recently revealed by Gabor Gurbacs, director of digital asset strategies at VanEck/MVIS. This partnership represents a significant step by a major traditional exchange into the crypto derivatives space, offering institutional investors a regulated vehicle for bitcoin exposure.