NYSE/ICE enter Bitcoin Exchange market; Bitcoin’s use as a payment method declines; Wall Street and institutional investors eye crypto.


The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.

For the intro to this weekly series, please go here.

Story 1: World’s Biggest Stock Exchange Operator is Launching a Bitcoin Market

Decrypted: The NYSE operator has announced the launching of a new global digital assets platform in November 2018.

International Exchange (ICE), the operator of 23 leading global exchanges including the New York Stock Exchange (NYSE), has announced plans to create a Microsoft cloud-powered open and regulated, global ecosystem for digital assets.

The International Exchange (ICE) is working on a Bitcoin trading platform that would allow investors to directly buy and hold Bitcoin without the involvement of futures, derivatives or other kinds of contracts.

The global network will be known as Bakkt and aims to build an open, seamless global network to enable investors to buy, sell, store and spend digital assets simply, safely and efficiently. It will connect investors, merchants and consumers, making it easier, faster and more cost-effective to access, trade and use digital assets. Microsoft and Startbucks have signed on as partners.

Our take: The news from NYSE comes just days after a Goldman Sachs executive publicly confirmed that the bank intends to enter the Bitcoin market by launching a futures market within weeks.

Goldman Sachs, CME, CBOE and other financial institutions that have already integrated Bitcoin on their platforms or are planning for the future, have either developed or are developing a futures market based on Bitcoin. None of the platforms deal with Bitcoin directly. Essentially, Goldman Sachs will offer its clients contracts mimicking the value of Bitcoin however the clients will not be able to hold or buy Bitcoin directly.

ICE’s cryptocurrency plans could play a significant role in helping crypto mature and draw more interest from traditional financial institutions. Specifically, it will allow banks to buy swap contracts that will end up with customers owning bitcoin the next day. This method of trading will provide institutions with the security of using the established exchange. In addition, swaps are already regulated by the Commodity Futures Trading Commission (CFTC).

This is game-changing​. Individuals would be able to add Bitcoin to their IRA or 401k. It will open up access to millions of people who have been sitting on the sidelines not able to add Bitcoin to their portfolios. While ETF’s will happen, now they have become less imperative, because with Bakkt, anyone will be able to buy and sell Bitcoin.

If that alone wasn’t big enough, there is a second layer to this news. The involvement of brands like Microsoft and Starbucks is huge, Bakkt will offer Bitcoin-fiat conversion for consumers to purchase everyday goods with crypto. Potentially we could see BTC rolling out to many other major retailers.

But despite NYSE’s big news for Bitcoin, crypto markets plummeted. A day after the announcement markets took a plunge, with Bitcoin (BTC) dipping below $7,000 and all of the top ten cryptocurrencies in the red.

The willingness of big industry players to associate themselves with Bitcoin is welcome news. When the largest stock exchange, which settles trillions of dollars opts for a crypto exchange, it validates the market. However, it does not diminish regulatory concerns, nor does it come without the possibility of squeezing out innovative first-movers.

For now, it looks like Wall Street’s biggest players and getting on board and developments like this can help cement the future of the cryptocurrency.

Story 2: Square has made $37 million supporting Bitcoin trading

Decrypted: This past week, Square revealed in a quarterly report to the U.S. Securities and Exchange Commission (SEC) on August 1, that its Q2 earnings from Bitcoin reached $37 million, slightly up from the $34 million it generated in the first quarter.

This brings Square’s total Bitcoin revenues for 2018, to over 70 million. While the quarterly increase may not be significant, it shows growing adoption of the digital asset which is slowly but surely leading to financial inclusion and access to all.

Our take: Square initially added Bitcoin trading to the Cash App in January, just before the cryptocurrency markets took a downwards fall, driving many investors away from the volatile markets. The addition of Bitcoin allowed Square customers to easily buy and sell the cryptocurrency, but the layout of their trading system has negatively impacted their profits.

In order to allow customers to instantly trade the digital currency, Square must purchase Bitcoin at varying market prices and hold a certain amount of Bitcoin in reserve. Because of market volatility, Square’s Bitcoin reserves can gain or lose value, which has caused the company to lose money.

In its quarterly report, Square disclosed that it’s now trading Bitcoin through private OTC brokers, instead of public cryptocurrency exchanges. By moving off of public exchanges, and trading through OTC channels, Square is able to better manage slippage, especially when trading large amounts of Bitcoin. Moving to OTC platforms can solve these problems. Trades can run faster, as they don’t require cash or Bitcoin to be deposited in the platform before placing an order, while transactions are more secure and private.

So are merchants accepting Bitcoin?

In a survey conducted by Nomura, 60% out of the US merchants surveyed, mentioned that they would accept Bitcoin. These merchants were from a variety of different industries and had an annual revenue of at least $100,000. The largest majority came from the 31-40 age group with approximately 40% of participants in that category.

A recent survey conducted by Chainalysis Inc., it came out that the use of Bitcoin (BTC) by merchants and for commercial use case scenarios has reduced quite a lot. Commissioned by Bloomberg, the survey showed that in the September of last year the merchant usage peaked at $411 million and then went as low as $60 million in May. These figures demonstrate that usage of Bitcoin as a currency has reduced by 85%. The calculation was done by the payments received through services such as BitPay, Coinify, and GoCoin, which supposedly went up to around $69 million in June. The reason for the decrease was attributed to Bitcoin “losing its appeal” as a currency and as a tool to buy goods and services.

The study, conducted by UK-based cryptocurrency purchasing website CreditCoin, showed that 75 percent of cryptocurrency holders would spend their coins in Point-of-Sale (PoS) transactions if they could.

Confusing, as several studies show all kinds of attitudes. I am not sure how to interpret it all, which is right or wrong, but I will tell you what I think.

With many technical and regulatory issues still surrounding Bitcoin, it’s clear that small merchants and large corporations are still hesitant about embracing it. As the technology continues to scale, stabilize and become easily convertible, the case for accepting cryptocurrencies as a way to get ahead, in our competitive fiat-based economy, will only become more obvious to businesses everywhere.

Initiatives like Bakkt can only contribute to increased adoption, and enable cryptocurrencies to become more integrated with mainstream markets, driving consumer adoption and thus businesses to accept Bitcoin.

Big brands like Starbucks jumping on the cryptocurrency bandwagon is only good news and shows that they are becoming more interested in crypto since they see their consumers want crypto and decentralized platforms.

Story 3: Bitcoin Futures Trading Volume Reaches $572M on Wall Street

Decrypted:  Bitcoin prices and cryptocurrency spot markets, in general, have been recovering after the downturn that took place from mid-December 2017 up until three weeks ago.

The volume of trading on CME reached 12,878 contracts on in on July 24th, in what was worth 65,390 BTC, as each contract representing a total of 5 BTC. CBOE had fewer contracts, 7,138 of them and each equivalent to only 1 BTC. The total volume of BTC was, then, 71,528 BTC via future contracts. This means a volume of $572.2 million USD in a single day.

While the volume is not so big for global standards, it is still very significant, especially because it involves Wall Street, which was away from Bitcoin last year when the market boomed. The global volume of Bitcoin during the day, according to CoinMarketCap, was $7.7 billion USD.

Our take: For almost 10 years, Wall Street’s opinion of cryptocurrency has ranged from indifference to outright condemnation. Now, a number of big players from the U.S. financial sector are launching bitcoin initiatives, are a clear sign they recognize the cryptocurrency as an asset worthy of attention in the game of global finance.

Wall Street is working its way into the world of Bitcoin, with several notable firms announcing (Goldman, NYSE Bloomberg)  they are getting ready to jump in. The recent surge in the trading volume of Bitcoin futures is a clear indication that funds have started flowing from the Wall Street to cryptocurrencies.

Over few months cryptos have caught the eye a lot of traditional Wall Street hedge funds. The venture capital arm of the Rockefeller Foundation, Venrock, had signed a partnership with Coinfund, a Brooklyn-based cryptocurrency investment fund.

SBI holdings in Japan is also considering investments in cryptocurrencies. SBI’s new stake in Clear Markets is part of an effort to create a cryptocurrency derivatives trading platform catered toward institutional investors.

The CME group reported that demand has been rising from institutional investors in Asia and that demand was up by 50% over the first four months of 2018.

There is still a lot in the works, as the issue around regulations remains open. But with everyone on Wall Street looking closely at crypto, institutional investors cannot keep a blind eye and we can expect trading volumes for Bitcoin futures to only to increase.

Image Source

Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing each Monday.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.