Bear Market's Little Helpers? A Guide to Crypto Futures

A popular view among those who follow the dynamics of the crypto world rests on a set of established points about BTC futures: they exist since late 2017; they are offered by Cboe and CME, two respectable regulated exchanges; they help manage investment risks and as such are supposed to draw institutional money into the crypto space, mitigating price volatility and lending credence to the underlying asset.

From allegations of massively suppressing crypto prices to a widening range of platforms offering crypto derivatives to a real prospect of Ethereum futures coming about soon, these developments point to the need of revisiting the realm of cryptocurrency-based futures.

At the same time, crypto futures held a promise for an alleged horde of retail investors who were interested in crypto assets yet wary of trading them on unregulated spot exchanges.

Perhaps the biggest advantage of Bitcoin futures for this category of traders is security: since owning a cash-settled crypto future does not entail touching a coin itself, the scheme does away with fears of hacking and theft of cryptoassets.

Cboe capitalized on their partnership with Gemini, a cryptocurrency exchange ran by the Winklevoss brothers, and used their experience with tracking crypto assets' prices to create a tool called Cboe Gemini Bitcoin Futures Index.

As early as in January, when a multitude of versions explaining the crash of Bitcoin price began to emerge in media space, one of the less-visible yet sound considerations was that futures trading had opened the crypto markets to bear investors.

"I've done the math recently and it doesn't seem to add up," - says Mati Greenspan, maintaining that the size of the futures market is simply not sufficient to thrust the whole crypto ecosystem into an extended bear cycle.

"The subsequent bitcoin price declines were not caused by the introduction of these futures, but rather the regulatory uncertainty surrounding the cryptocurrency market. In addition, we believe irrational speculation by pessimistic investors has also contributed to the price movement over the past six months. As such, we see the ongoing crypto bear market as clearly cleansing the ecosystem from short-term oriented speculators, which will be good for the crypto ecosystem long-term."

On May 11, Crypto Facilities exploded another bombshell in the crypto space, revealing ETH/USD futures as their latest offering.

"As we approach the anniversary of futures trading, we expect more institutional investors to make big moves with crypto dedicated funds. One recent example of this was the recent announcement of A16Z, a $300 million crypto fund launched by Andreessen Horowitz dedicated to investing in cryptocurrencies and other blockchain-related projects," - notes Kulkarni.