Cryptocurrency Derivatives Series: Mounting Interests for Structure Products in Cryptocurrency Gamut

We have an array of derivatives markets for traditional asset classes, such as, from a range of stocks to mortgages, be it ETFs, index funds, index options or hedge funds, etc. Many Wall Street players are now, lined up for such contracts are being designed and developed for bitcoin and other crypto peers and desperately eyeing to obtain regulatory approvals. 

In recent past, a couple of cryptocurrency firms have begun peddling“structured products” driven by the price of bitcoin. The payout from such modern-day contracts is absolutely dependant on complicated formulae. The entire crypto industry is still evolving, and the market is in the evolutionary phase. 

The underlying price of BTCUSD has been showing two-way price action, it has jumped from the lows of $3122 to the recent highs of $13,880 levels (i.e. rallies of 340% as stated in our posts). From there, the pair has tumbled back below $10k areas, tested strong supports at $9,614 levels (i.e. 7-DMAs, refer weekly plotting).

While articulating, Bitcoin price is gaining about 5.63% at its current price of $11,367, up considerably from its weekly lows of $9,614.

Amid such price turbulence, Craig McCann, a former Securities and Exchange Commission economist, raises a cause of concern that it’s a bad idea to take bitcoin — a volatile, speculative asset traded on unregulated exchanges—and use it as a building block for complex instruments.

“There are all kinds of problems associated with any structured product tied to bitcoin,” said Mr. McCann, who now leads the Securities Consulting & Litigation Group, a firm that provides expert witnesses for companies involved in securities lawsuits. “It doesn’t belong in anybody’s portfolio.”

Cipher Technologies, a crypto hedge fund based in Greenwich, Conn., began offering structured products on bitcoin earlier this year. The firm has done several such deals, mainly with entities that manage money for wealthy families and individuals, said Gerald Banks, a founder, and managing partner at the firm.

“We would not fathom pushing this to anyone who would not be fully versed in the risk or in the nature of the underlying asset,” said Mr. Banks, who helped develop Merrill Lynch’s structured-products business in the 1990s and early 2000s.

Structured products usually comprised of derivatives generated by the financial institutions and banks that would otherwise be hard for their clients to buy or sell elsewhere.

The much-awaited Bakkt’s platform for bitcoin futures contracts with physical delivery facility appears to be ready to go. Yes, it is finally all set to unveil on this July 22nd.

Quite a few crypto aspirants have been hoping that the institutional-grade offering will encourage investors. Mr. Adam White, the COO of cryptocurrency platform Bakkt, mentioned in Medium blog that the ICE-backed start-up will commence testing its much-anticipated Bitcoin futures contracts from July 22nd. In yet another case, the Commodity Futures Trading Commission (CFTC) has approved crypto firm LedgerX to offer physically settled bitcoin futures contracts.

Currency Strength Index: FxWirePro's hourly BTC spot index is flashing at 98 levels (which is highly bullish), hourly USD spot index was at -25 (mildly bearish) while articulating at (13:31 GMT). 

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex