Recent events have proven that the crypto industry is maturing. The digital market has been rocked by a myriad of scams in the past. According to Ciphertrace, a cryptocurrency intelligence firm, crypto scams and theft could amount to $4.3 billion in 2019. Despite these scams and thefts, the crypto industry is maturing due to a flurry of recent developments.
For starters, exchanges are monitoring themselves. For investors, market maturity translates to reduced trans-fee mining, wash trading and market volatility. With the current altcoin influx, there is a need to monitor the investment instruments accessible to investors. The institutional goods and analytics providers’ sectors, especially, stand out as promising in an otherwise complex industry.
New wave of Crypto Derivatives Products
While some might gauge the industry’s maturity with this year’s short-lived security token excitement, real growth is based on building dependable cryptocurrency products. Bitcoin derivatives, for example, have attracted massive volumes after the breakthrough of BitMEX and similar digital exchanges like OKEx offering coin swaps. Even so, the past inquiry on BitMEX has pushed upcoming derivatives companies into regulatory compliance.
ErisX is one of the platforms that have been approved by the Commodity Futures Trading Commission (CFTC). This means that the Chicago-based establishment can now deal in futures contracts. Derivative center LedgerX was also cleared. Like ErisX, the platform can now distribute futures contracts after the CFTC said yes to its designated contract market (DCM) license request. Not to forget digital asset firm Bakkt; which secured a charter to run a liability trust organization. Courtesy of the New York State Department of Financial Services, Bakkt will issue bitcoin custody packages for physical futures.
Having obtained CFTC’s approval, the products are expected on September 23. This move has attracted various opinions from the crypto industry. In a recent Twitter thread, market expert Scott Melker declared that Bakkt’s physical futures would not only increase access to institutional funds but was also a lasting bullish advancement for bitcoin. Beyond the United States borders, derivative companies like FTX are making significant progress after teaming up with quantitative exchange agency Alameda Research and payment solutions like Circle.
BitMEX has been the center of attention following rumors of CFTC’s investigation into the accessibility of the platform to US traders. Because CFTC controls derivatives in the US, BitMEX must register with the regulator for Americans to trade futures in their country. Crypto analyst Nouriel Roubini even ambushed BitMEX with claims of systematic illegality. Seeing that BitMEX promises nearly 100x leverage, Roubini reasons that this figure is too high and exposes users to unmanageable risk.
An Expanding Environment for Investors
The progression does not end at derivatives packages. Take the example of Ethereum-backed crypto service Morpher. Already in assessment, this platform provides unlimited liquidity and allows trading free of charge. By so doing, Morpher bridges the gap between crypto assets and conventional financial instruments such as bonds and stocks. In most cases, these entities are consolidated through methods such as incorporating virtual assets into established trading platforms as well as administrative improvements on tokenized properties and ETFs.
But these methods are not always effective. Though they might minimize entry barriers, the fact remains that tokenized assets are securities nonetheless and are guided by the same regulations and fee-charging intermediaries. So how do we integrate crypto assets with mainstream financial tools? Morpher suggests virtualizing the trading process with Ethereum blockchain networks. Denis Bykov, Morpher’s COO argues that the industry is filled with brokers charging outrageous fees for poor services.
According to Bykov, an ideal market does not have barriers between an investor and their commodity, has zero trading charges and maintains liquidity at all times. Morpher’s CEO Martin Froehler describes the service as a replacement to Ethereum supported index funds, digital exchanges, and brokers. Having had difficulties using the current financial systems, the organization’s founding members switched to blockchain to enhance access to the investment landscape. This initiative caught the eye of investment genius Tim Draper who has been seeking inventive crypto startups through his corporation Draper Associates. The engagement earned Morpher $1.25 million in January 2019.
The industry is also embracing transparency. This has taken the form of improved market metrics, detailed research engines, and boutique analytics packages. CoinMetrics, for instance, has become a resourceful charting instrument for industry experts such as Adaptive Fund’s lead researcher David Puell who refers to it regularly. The reports published in its weekly newsletters come in handy to predict market trends. One such statement caused a great uproar after it revealed inconsistencies in Ripple’s blockchain payments. According to the analysis, the publicized figures did not match the ones on the XRP registers.
Entrepreneurs are monitoring services such as CoinMetrics too. To begin with, tech company Digital Assets Data accomplished a $3.2 million financing round thanks to firms like North Island. Similarly, newsroom Crypto Briefing received $2million funding in 2018 courtesy of entities like Fenbushi Capital as well as DHVC. The financing round came before the agency released Simetri, an institutional commodity concerned with simplifying the crypto industry.
Regulatory certainty will only occur after institutional entrance is streamlined. For now, the investment tools available to investors and analysts remain equally effective in evaluating market progress. Needless to say, the crypto landscape has come a long way and is destined for breakthroughs in the future.