Expert Insight

Bitcoin Futures to provide more options in 2019

There's been much talk about Bakkt and Nasdaq entering the market in the New Year, with bitcoin futures products, but what will be different over the next 12 months?

As the New Year is just around the corner, there’s already been much discussion about Bakkt and Nasdaq entering the market in 2019 with bitcoin futures product.

It is only a year ago when CBOE and CME were about to launch, although what’s different this time around is the markets are failing to rally.

So, what will be different about bitcoin futures in the New Year?

Freefall

In November, it emerged that the early access waitlist for the Digitex Futures exchange had already reached 500,000 people. Within weeks, there were another 120,000 sign-ups against a backdrop of the overall cryptocurrency downward freefall.

It may feel against the odds with the price tanking, another delayed ETF and many ICO companies running out of money before they are able to deliver their product, but Digitex is going strong.

Demand remains for its commission-free futures exchange and is growing at a pace.

Bears

But bitcoin futures are not for everyone and there’s a large number who believe it is allowing the bears to flood the market by going short on bitcoin.

Exchanges, such as CME and CBOE, have traders who don’t event have to have a bitcoin to place a trade.

Since all contracts that expire are cash-settled, no bitcoins ever change hands and the trader’s account is merely credited in fiat.

This means all institutional cash that many in the space were waiting for at the end of 2017 has stayed in the hands of the traders and exchanges – so far.

Different value proposition

While futures exchanges like Digitex and Bakkt allow traders to make money in a bear market, both companies offer very different value propositions to existing ones.

On Digitex, all transactions take place in native token DGTX and account balances are denominated in it. Futures contracts are cash settled like CME – they are paid out in the native token and not bitcoin.

But you can only buy DGTX with bitcoin and Ethereum, which means traders have to be invested in the space to participate. A good thing for the crypto market, surely?

The first 5,000 names to sign up to its Early Access Waitlist will be airdropped 1,000 DGTX to trade with before it opens to the wider public.

Retail traders

Current futures exchanges either don’t serve the needs of retail traders or commission fees don’t allow for scalping and margin trading to be profitable.

Adam Todd, Digitex CEO, says: “Commission-free futures markets that allow disciplined traders to make profits will be very popular and attract large numbers of traders. Finally, they can actually grind out a real living from trading!”

Bakkt’s launch in January is also likely to be interesting for the crypto industry. While their flagship product is a one-day ‘physically delivered’ Bitcoin futures contract, it doesn’t compete with Digitex as its market is institutional investors and traders.

Commodities

As you can’t physically deliver bitcoins, it means contracts are settled in bitcoins like the physical commodities of gold or oil.

Institutions will have to invest in crypto if they want to go long or short on Bakkt, which will boos the industry further.

Todd believes the companies will co-exist and complement each other to give crypto the boost it “desperately needs.”

Unlike Bitcoin future exchanges so far, Bakkt, Digitex and even Nasdaq can only add to the ecosystem in a positive way.

While it is not year clear how the Nasdaq bitcoin futures contracts will be settled, in cash or physically, the entrance of such a heavyweight inevitably boosts the industry and helps with transparency and regulation, which are much-needed.

 

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