On November 29, 2018, major developments in the cryptocurrency exchange space saw Coinbase, Huobi, and Nasdaq introduce advanced trading services aimed at institutional investors, including over-the-counter (OTC) trading, derivatives, and futures contracts. These moves signal the market's rapid evolution toward maturity and institutionalization.
Coinbase Launches Dedicated OTC Desk
Coinbase has launched an over-the-counter (OTC) trading desk. The initiative went live earlier this month exclusively for its Prime members, who include hedge funds and other agency-level businesses. These high-rolling clients can now use the service to trade cryptocurrency via direct communication methods such as Skype, email and by 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 available on the new platform 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, for example, now plans to launch regulated bitcoin futures-type contracts in the first quarter of 2019. This is 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.
In summary, late 2018 witnessed a wave of institutional-driven innovation in the crypto industry. Coinbase's OTC desk lowers the entry barrier for large traders, Huobi's derivatives market provides more risk hedging tools, and Nasdaq's futures product marks the deep integration of traditional financial infrastructure with digital assets. These developments will undoubtedly push the cryptocurrency market toward greater professionalism and transparency.