Rise in Bitcoin Futures Volume Forces Credit Agencies to Downgrade Dealers

In April, it was reported that bitcoin futures markets saw a steady increase in their volume. Recently, it was announced that products from Cboe and CME Group are still experiencing popularity even after bitcoin reducing to considerable lows.

The month of June has been extremely negative for crypto markets which have already been struggling to achieve the heights it ascended last year. The most popular virtual currency, bitcoin core, has lost more than $13,000 in the first half of the year.

The value of BTC spot went down after the establishment of the Cboe and CME Group futures market. It is to be noted that these platforms did not meet with much business after their initial days with less than hundred contracts per day.

Since then, things have changed as both marketplaces have enjoyed an increase in demand for contracts starting from April. On June 11, BTC futures from CME Group greeted more than 3,800 contracts expiring in this month. On the other hand, another giant from the industry, Cboe, enjoyed over 8700 contracts for June 11 which hints that a bearish market leads to an increased interest in futures. After Cboe announced the sales of 19,000 contracts on April 25, the average derivate sales for both the companies have been significantly progressive.

But, as futures market functions, an increase in business will involve financial institutions and clearing houses in the equation. It is believed that credit agencies will be enforcing a credit downgrade to prevent over sales of new contracts. Recent reports suggest that major three rating agencies, S&P, Fitch and Moody’s are discussing about a potential downgrade in credit ratings for banks that clear bitcoin futures.

In October 2016, Standard & Poor’s (S&P) Global, came out with a report that stated the affect blockchain development would have over credit ratings of banks that will employ the technology. Earlier in February, credit agencies looked to downgrade financial entities in case of a volatile increase in the sale of contracts.

However, the report also stated that it is hard to speculate on the extent of impact blockchain will have on the company’s ratings in the industry. The report added that S&P believes “that at the very least blockchain presents an opportunity for financial institutions which can “even generate new revenue streams.”

These agencies believe that providing ratings for BTC based futures is highly risky to the extreme volatility of the market. In case a downgrade is imposed all clearing houses will get affected including banks that provide the contracts directly. Their decision can disturb asset management of any financial entity with its lending requirements.

According to experts, the steep decline in crypto space is due to future products based on digital currencies. The example can be taken from the impact derivate products had on precious metals market and lots of other businesses.

It will be interesting to see the effect downgrade would have upon people interested in bitcoin futures. It is hoped that the step would uplift the crypto space and balance trades in the derivatives market.…

Brad Garlinghouse Considers China as the Controller of Bitcoin

Brad Garlinghouse, CEO Ripple, took part in a question and answer round at the 2018 Stifel Cross Sector Insight Conference. He gave answers to many intriguing questions asked by Lee Simpson, Stifel Tech Analyst.

In the initial part of the session, he said that blockchain wouldn’t be having a negative impact on financial institutions. According to him, many people have tried to use the technology but a market winner can only be spotted by three indicators:

Customer Traction
Product Market Fit
Regulatory Engagement
He further added that banks would not be harmed by blockchain, but the technology will transform the way our system operates. In a shocking statement, he also declared that China controls bitcoin and asked several questions about the usability of the poster boy of cryptocurrencies.

He then told the crowd that bitcoin is not the magical solution to our financial issues as we thought it would be. The CEO also backed XRP saying that it is the future of liquidity management in the market. As of now, his focus is primarily on emerging crypto markets in the world.

Backing his currency, he informed that XRP was acknowledged as “the best digital asset for settlement.” While comparing his coin with the market leader, he claimed that XRP only takes 4 seconds to settle a transaction whereas bitcoin takes 45 minutes to perform the same process. Being optimistic he stated that banks will always choose a cheaper and more efficient system. As XRP is a superior product at an exceptional price, a bank will use it in any condition.

He added, “A number of prominent people, even Steve Wozniak, has said that he sees a world where Bitcoin is the primary currency. I think that’s absurd. I don’t think that any major economy will allow that to happen. By the way, it doesn’t make sense.”

Garlinghouse then said that only four miners from China produce 50 percent of the bitcoin which essentially describes their control over the digital currency. He then asked that how many people would be comfortable with a China owned currency.

At one moment he advised investors to invest an amount in virtual currencies which they are ready to lose. Nobody knows the future of cyber coins which makes it a better-investing strategy, he said jokingly. He then asked the crowd to ignore everything he said which made them burst into laughter.

The CEO said that he does not aim for the digital asset market and aims for millions of people who are underbanked or unbanked. The ongoing transformation will change the way people interact with a financial entity. He said that the fundamentals of the system could be adapted to upgrade the users of the service.

Ripple is among the more recognized virtual coins, and its value is expected to increase by the end of the year.

Concluding the interview, he stated that we are at the initial stage of a very long marathon. His claims should be conceived with a pinch of salt as the CEO was basically promoting his currency more often than necessary.…