Bitcoin Now a Regulated Market of Significant Size

In a memorandum, issued Sept. 17, the SEC published Bitwise’s presentation outlining why it believes the regulator’s concerns have been largely addressed.

Crypto index fund provider Bitwise Asset Management has given another presentation to the United States Securities and Exchange Commission (SEC) in its bid for regulatory approval of its proposed Bitcoin exchange-traded fund (ETF).

Bitcoin spot market now more efficient

The presentation started by recapping how the market has evolved and improved over the past two years.

Firstly, the spot market has become more efficient, with the average deviation of Bitcoin prices across the top 10 exchanges falling. Although this was just below 1% back in December 2017, it has now dropped further to under 0.1%.

Institutional-grade Bitcoin infrastructure is being built

In addition, many new institutional-grade Bitcoin custody services are springing up and receiving licenses from local jurisdictions to manage and store Bitcoin for clients.

Meanwhile, this year has seen record Bitcoin futures volumes on the Chicago Mercantile Exchange, suggesting that the regulated futures market is now of significant size.

Crypto industry addressing 95% fake volume reports

Bitwise also notes that, following research published earlier in the year that 95% of trading volume is fake, there have been several developments.

Data providers responded by implementing measures to ensure reported data was more accurate – with exchanges reporting a drop in volume of more than 90%.

Data patterns on certain other exchanges shifted to match the real-world patterns witnessed by Bitwise. But overall, there is now a greater awareness of the existence of fake volume and more exchanges are taking steps to address these concerns.

Overall, the efficiency of the Bitcoin and cryptocurrency market continues to increase, along with volumes at the top 10 exchanges.

Bitwise hopes that this will allay the SEC’s concerns over its Bitcoin ETF application, and finally give it a green light next month. However, SEC Chairman Jay Clayton recently reaffirmed his assertion that more regulation is needed before Bitcoin is traded on major traditional exchanges.

CME Group to Launch Options on Bitcoin Futures in Q1 2020

The Chicago Mercantile Exchange (CME) Group is adding options to its Bitcoin futures contracts in the first quarter of 2020, pending regulatory review.

The development was announced in a news release on Sept. 20.

“Flexibility to hedge Bitcoin price risk”

Tim McCourt – CME Group Global Head of Equity Index and Alternative Investment Products – said:

“Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk.”

McCourt added that the new products are intended to help institutions and professional traders manage spot market Bitcoin exposure, as well as enable them to hedge Bitcoin futures positions in a regulated exchange environment.

CME Group’s announcement notes that, since the launch of Bitcoin futures on the exchange in December 2017, there have been 20 successful futures expiration settlements, with more than 3,300 individual accounts trading the product.

Year to date, a reported 7,000 CME Bitcoin futures contracts – equivalent to roughly 35,000 BTC – have traded on average each day.

For clients hedging or trading benchmark options on futures across diverse asset classes, CME Group notes that it has seen an average daily volume of 4.3 million in 2019 thus far.

Meanwhile, institutional interest in CME Bitcoin futures peaked in early summer 2019, with a record 56 large open interest holders reported in July.

Institutional momentum gathering pace

This intense uptake has been gradually building all year, with Cointelegraph previously reporting that, in May, CME Bitcoin futures had hit a then all-time high.

Elsewhere in the institutional Bitcoin futures space, Bakkt Warehouse – the qualified custodian for crypto trading platform Bakkt – began accepting customer Bitcoin deposits and withdrawals earlier this month.

Bakkt intends to launch physically delivered Bitcoin futures, in contrast to the existing cash-settled Bitcoin futures offered by both CME and the Chicago Board Options Exchange.

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