A popular trend as the cryptocurrency industry develops is the introduction of the analogous derivative instruments of the traditional financial market, aimed at luring in institutional investors into the crypto world. One such instrument is the exchange-traded fund (ETF).
CEO of leading cryptocurrency exchange Binance, Changpeng Zhao, has, however, downplayed the role of ETFs in the growth of the crypto industry. He said: “If it [a Bitcoin ETF] is listed on a big traditional exchange… that does bring in a lot of attention from people outside our industry.”
In a live stream via Periscope on 6 February, Zhao attempted to draw the attention of crypto enthusiasts to a very important piece in blockchain development – entrepreneurs building real, and usable products.
Blame it on the bear
The bear market which started at the cusp of the last all-time high of Bitcoin hasn’t made it easy for crypto projects. Many startups last year faced developmental challenges and were either forced to abandon their projects or get absorbed by another. Now, lots of players in the industry have become highly dependent on these market derivatives being introduced.
First, it was Bitcoin futures introduced by CME Group and CBOE in late 2017, which helped drive the price of Bitcoin to a new high of USD 20,000. However, it didn’t last long. Suffice to say, it was an opportunistic glitch in the price dynamics of Bitcoin.
Secondly, speculations about another bull-run propelled by ETFs run deep in the crypto community. Perhaps similar trends are bound to occur with more derivatives being introduced into the sphere, however, without an established value-based blockchain ecosystem in place, the market could get dire once more.
ETFs or no ETFs
As of the time of writing, the US securities regulator, Securities Exchange Commission (SEC) has rejected nine ETF applications. Each was laden with similar bull run expectations from the members of the crypto community as many have speculated on the prices increase should the SEC give the green light.
Recently,CBOE, along with investment firm VanEck and financial services company SolidX, reapplied for a rule change to list Bitcoin ETFs after withdrawing it a week earlier.
With the ongoing fuss about Bitcoin ETFs, Zhao seems to think that with or without the ETFs, the industry will grow. A sentiment probably sparsely shared as focus on the real development of blockchain and its applications are fairly the driving motif for latter blockchain adopters.
Other derivatives are coming
Bitcoin News recently reported a new class of derivative instrument being introduced by US-regulated derivative platform LedgerX, which is essentially a binary wager on the next Bitcoin’s block-reward halving.
While derivatives may be an economic milestone for the crypto industry, the overall utility of blockchain applications and their gradual adoption by legacy systems adequately offset the economic benefits of derivate crypto markets.
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