• Tue. Jul 23rd, 2024

How Will Crypto Futures and ETFs Impact the Industry?

 

With the current ongoing regulatory drama that surrounds the crypto and derivatives discussion, it’s no small wonder that the cryptospace seems focused on one thing: approvals.


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The big issue has more to do with the impact of these novel products, rather than a question of adoption.

Then again,  we still have a very LONG way to go to reach the final regulatory path.

So, as the future seems heady, we still can focus and keep on the singular adoption path per these exotic products.

Our team of experts gave us their depths of insight, predictions and more on this rather interesting subject.


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Here’s what they had to say.

 

 

 

Konstantin Boyko-Romanovsky , CEO at Allnodes

“The launch of cryptocurrency futures and ETFs in the U.S. marks a significant achievement, following the lead of places like Canada that have had crypto ETFs since 2021. These new products build a bridge between traditional finance and the crypto sphere. They give institutional and individual investors a structured way to get exposure to digital assets without directly owning them. ETFs lower some of the complexities and risks of dealing directly with cryptocurrencies and provide familiarity for folks used to more traditional investments.

ETFs especially have the potential to spur more widespread crypto adoption. Rather than threatening the industry, putting digital assets into a familiar wrapper could bring in a wave of new capital. That leads to more liquidity and stability in the market. As more ETFs get approved and hit the market, they can help debunk crypto myths and further integrate them into the financial mainstream.

Rising inflation worries globally and in the U.S. have also put a spotlight on crypto as inflation hedges. Assets like Ethereum, with its deflationary setup and Bitcoin halving on the horizon, stand out as ways to preserve purchasing power.”

 

 

 

David Waugh,Lead Analyst at Coinbits

“Futures and ETFs introduce a level of complexity to the bitcoin market that is both beneficial and problematic. On the one hand, they offer traditional investors more accessible entry points into the bitcoin ecosystem, increasing liquidity and potentially its stability over the long term. On the other hand, they present avenues for potential market manipulation.

For instance, individuals or entities with significant financial power can sell futures contracts at a loss to artificially suppress bitcoin’s price. This tactic has been observed in the gold market. Just this week two former JP Morgan executives received jail sentences for manipulating gold markets. Bitcoin futures allow bad actors to hypothetically create a situation where the spot price of bitcoin is driven down, albeit temporarily, due to the arbitrage opportunities created between the futures and spot prices.

However, bitcoin’s unique characteristics, such as the ease with which it can be held in self-custody, make it more resilient to such manipulative strategies. Unlike with gold, where paper claims often far exceed actual holdings, bitcoin can be easily verified and transferred, minimizing the impact of ‘paper’ bitcoin affecting the actual supply. In the long term, the ability of bad actors to manipulate the prices of other assets might not translate to their ability to alter the price of bitcoin.

While futures and ETFs provide more tools for potential market manipulation, the intrinsic qualities of bitcoin are likely to offer a level of resistance to these tactics that is not present in traditional commodities like gold. Therefore, while these financial instruments could lead to short-term price suppression or volatility, the fundamentals of bitcoin make it less susceptible to long-term manipulation.”

 

 

Lucas Kiely, Chief Investment Officer at Yield App

 

“Crypto futures are not a new thing. Many traditional finance institutions have used crypto futures to trade the asset class through the CME, including Goldman Sachs. As such, the approval of any new futures ETF for Ether, while being good news in general, is unlikely to move the needle in any significant way. What it does signal, though, is increased interest in and acceptance of crypto among institutional investors. It should also lead to greater liquidity, which is very much needed in order to dampen volatility in the markets.

While we already have bitcoin sports ETFs in Canada and Europe, approval in the US would be much more significant as it will allow large flows into the asset via US asset managers that control the vast majority of global assets. For this very reason, though, the SEC is rightly cautious. Bitcoin remains a relatively small and illiquid asset where prices can be moved significantly by large holders of the asset. As such, we may not yet be ready for a U.S.-based ETF.”

 

 

Richard Gardner, CEO, at Modulus

“There’s no doubt that the emergence of a Bitcoin ETF, combined with cryptocurrency futures, will transform crypto. However, it is the emergence of these new strains of activity, in combination with other external events, that create the real powder keg of opportunity here. First of all, it isn’t a matter of if — it is a matter of when — the United States approves an ETF. Like it or not, here Bitcoin ETF comes. Coinbase has already secured a license for futures trading from the National Futures Association, which means that there are a number of major crypto-preneurs that are already working on creating an exchange of their own. The competitors are already jockeying for their piece of the pie, including names that the world has never before seen.

We’ve seen the crypto winter, in part caused by the FTX debacle and in part caused by global economics. Now, we’re at the tipping point. Twitter is moving towards a Bitcoin focus, and it isn’t unreasonable to think that they may emerge as a competitor to PayPal. PayPal, on the other hand, has its own stablecoin backed by the dollar, which it plans to monetize, and which will almost certainly expand the map, adding numbers to those who are interested in and engaged in cryptocurrency. These events, in conjunction with Bitcoin ETFs and futures exchanges, will bring about a renaissance in digital assets.

On the regulatory side, we have Indian Prime Minister Modi beginning to advocate for a global crypto framework — conveniently at the same time as many are calling for a global AI framework. Politicians are beginning to understand that cryptocurrency isn’t going away. But more importantly, they’re afraid of being shut out of the future of finance. Quite possibly, as early as the first half of 2024, we may see stratospheric growth as Bitcoin prepares for a halving event. In short, the time to build and prepare for the future of cryptocurrency is today.”

 

Related: With the Arrival of Bitcoin Future ETFs we talk to William Cai of Wilshire Phoenix for Clarity

 

Laurence Latimer, CEO at Dinara

“What we’re seeing today is the natural evolution of new technology as we seem to be getting closer to dramatically increasing availability of digital assets.

More scaled ETF and ETPs could dramatically increase the availability of digital assets for more mainstream institutional and retail investors. Those ETF and ETPs will drive increased demand for assets that will most likely provide short-term upward pressure on asset prices. Longer term, the real benefits will come from the greater regulatory acceptance that an ETF represents.

Additional ETF and ETP regulatory approvals represent a push to make the regulatory regime more accessible for digital asset companies rather than just for traditional incumbents. This increases choice for investors and allows them to make more informed decisions to manage their risk and optimize their upside. That is good for investors and for providers.

This also appears to be driving up demand for digital asset infrastructure providers. These providers are doing the hard work of finding compliant paths to offering digital asset-based products and services. Just in the last few weeks we’ve heard of positive developments from big companies like Grayscale and BlackRock in asset management and PayPal and SWIFT in payments.”

Related: Are Bitcoin ETF Applications Bitcoin’s Best Marketing Strategy?

 

 

 

 


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Kevin Moore - E-Crypto News Editor

Kevin Moore - E-Crypto News Editor

Kevin Moore is the main author and editor for E-Crypto News.