Derivatives play an important role in the traditional market, but for crypto inadundry they can have much more important. Last year’s launch of futures led to rapid growth, but some blame them and in the subsequent collapse. Today, several large financial companies immediately announced the development and launch of new cryptocurrency derivatives of trading instruments. In the article, we looked at the varieties of derivatives, their essence, the possible impact on the market and the formation of virtual currencies in general.
The derivative financial instrument, Derivatives, is a contract between two or more parties, the value of which depends on the basic assets, such as stocks, currency, bonds, coins. Changing the price of the base leads to a change in the value of the derivative.
Derivatives are often used for hedging and speculation. In the first case, traders are usually trying to minimize the risk in the physical market, protecting the base asset from sharp changes in the course, inflation and other factors. Speculators are motivated by potential profit, and not mitigating oscillations.
There are 15 types of derivatives, but only four are the most common:
They account for the bulk of the derivatives market and their most often use institutional organizations and large investors.
In the near future, a new wave of launch of cryptocurrency derivatives is expected. The world’s largest operator Intercontinental Exchange (ICE), which owns the New York Stock Exchange, announced that on December 12, 2018 plans to launch futures on Bitcoin on his
Large American Bank Holding Morgan Stanley also
Citigroup, one of the largest financial conglomerates, develops a product called
Cryptovali derivatives can increase the liquidity and volume of digital assets. New tools will begin to attract institutional and large investors by moving, thus, considerable cash flows on the crypton. This will cause the growth of trade turnover and reducing the level of volatility. The overall increase in activity may also cause the formation of a sustainable positive trend.
Another «side effect» of the launch of new cryptoderivatives is to accelerate the process of regulating the digital financial assets market. Many governments are already developing and begin to integrate the norms of control over crypto industria in their legislative bases. Derivatives can confirm stability and confidence in virtual currency.
If the Exchange wants to offer cryptocurrency derivatives to clients, it will require observation by the financial regulator, which guarantees the legitimate nature of the transactions and security of investors. This will allow not only to stabilize the industry, but also to form a fairly developed institute, accountable to government and its participants.
According to the analyst Exante Viktor Argonova, the emergence of new cryptoderivatives in the market unequivocally increases world interest in digital currencies, creates a reputation reputation — even if states do not share the enthusiasm of issuers. The enchanting growth of cryptocurrency courses in November-December 2017, in my opinion, was strongly connected with the expectation of Chicago Bitcoin futures. And although some economists warned that the course can then collapse, the mass of investors was more important than the political effect.
«Similar events, such events will increase the interest of investors and at least temporarily — market capitalization. Of course, it does not guarantee the continuation of growth further, but the propaganda effect is definitely positive. And the more citizens feel that cryptocurrencies became part of the daily market — the harder the governments would ignore them. Perhaps for some it will be the final argument to legalize digital assets. What will the regulation be — while it’s hard to say «
International organizations, such as FATF, IMF, OECD, are now actively studying the impact of cryptocurrency on the world economy. Recently, the financial stability council, which includes 68 structures, such as central banks, regulators and ministries of finance,
In the analytics document, it is said that virtual currencies do not pose a threat to the economy, but still recommend regulators to observe the growth of the cryptors. Although these concerns are not relevant yet, since at the time of writing the material, the total capitalization of the cryptocurrency market is 26% of its maximum value of $ 830 billion. In addition, the assessment of all coins and tokens in the fiath of the equivalent of barely reaches the level of 2% of the cost of mined gold.
This suggests that governments fear to lose their power and control over the most important control lever — finance. However, forced to reckon with growing interest in crypto industry and the obvious benefits of decentralization.
Ultimately, the derivatives themselves are not, and people (investors, traders and owners) determine the fate of assets. The founder of the Ethereum Blockchain-platform Vitalik Biderin said on this that now the community will pay too much attention to new trade instruments, instead of directing their efforts to popularize virtual currencies by creating the opportunity to pay them in the nearest store.