An anonymous source close to LedgerX has revealed that the crypto startup is nearly ready to launch new trading options tied to Ethereum, the second most valuable crypto asset in terms of market capitalization. LedgerX has made no official announcement yet and is simply waiting for the American Commodities Futures and Trading Commission (CFTC) to become more familiar with exchanges that offer coin swaps and options.
Although LedgerX has attracted institutional investors of varying sizes since launching its Bitcoin swaps vehicle in October 2017, it has not yet attracted the attention of a large American bank, like Goldman Sachs or Fidelity. LedgerX may also face competition from other companies like Cboe Global Markets, which plans to launch Ethereum and Bitcoin Cash futures in the near future.
Regulators Still Leery of Cryptocurrency Trading
Regulators have cited market volatility as a concern for the approval of new exchange-based products such as Exchange-Traded Funds (ETFs). Moreover, the American SEC has not yet approved a Bitcoin ETF due to concerns about market manipulation, which ties in with the issue about volatility. This has sometimes frustrated cryptocurrency traders who have hoped that a proposed Bitcoin ETF from a well-established crypto platform like Gemini would be approved quickly.
On the flip side, some cryptocurrency insiders don’t seem to be too thrilled about the concept of institutional finance getting involved in the cryptocurrency market in the form of an investment in a crypto-backed ETF. Some are even willing to criticize those who are so eager to bring in the big banks and their money after so many years of the cryptocurrency community being opposed to the banking industry. For instance, a Twitter user going by the handle of @byongho added some sarcasm to the mix:
“I hate the banks and governments, they will all die” said the BTC maximalist while cheering for an ETF approval and enjoying that big banks are about to open crypto trading desks.
Either way, the SEC’s complaint that cryptocurrencies are still volatile is not entirely without merit. Some relatively less popular altcoins can be prone to wild price swings on the slightest piece of news and can sometimes become targets for “pump and dump” groups on Discord and Telegram. Bitcoin and most altcoins are still less than half the value that they were in December 2017. Ether, for one, is still trading in the low $200s as of the time of this writing.
Even with the SEC’s theoretical approval of ETFs and the CFTC’s theoretical approval of both LedgerX’s and Cboe’s Ethereum-based options trading vehicle, the volatility probably won’t go away completely. Options are often seen a way for institutional investors to hedge their bets by (pun maybe intended) giving them the option to set their own price for an asset to be delivered in the future or decline to purchase if the market falls below that price.
That might ease some concerns among regulators and investors about the wild swings in cryptocurrency prices. If reports of LedgerX’s planned Ethereum-based options trading are true, the company may simply be playing a waiting game while the CFTC and SEC become more comfortable with cryptocurrencies.