Bank of America is allowing some clients to trade bitcoin futures, report says

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Bank of America is reportedly addressing demand for bitcoin access by clients.

  • Bank of America has approved access to bitcoin futures to some clients, CoinDesk reported Friday.
  • The bank gave the green light due to the large amount of margin required to trade the futures, the report said.
  • Bitcoin is trading at less than half its all time high of near $65,000 achieved earlier this year.
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Bank of America is allowing some of its clients to trade bitcoin futures, according to a CoinDesk report, a move that highlights the growing push by institutions into the cryptocurrency market.

The second-largest bank by assets in the US has been conservative in dealing with cryptos but it has approved giving some clients access to the market due to the large amount of margin required to trade the futures, CoinDesk reported Friday, citing an unnamed source. Another source told the site some of BofA’s clients are setting up to trade bitcoin futures and that one or two may have already started trading.

To address institutional interest in digital currencies, Bank of America recently launched a cryptocurrency research team, according to a memo obtained by Insider.

“Cryptocurrencies and digital assets constitute one of the fastest growing emerging technology ecosystems,” said Candace Browning, head of global research, in a July 8 memo addressed to Merrill Lynch Wealth Management employees and partners.

Goldman Sachs has expanded its presence in the bitcoin market by offering non-deliverable forwards, a derivative tied to bitcoin’s price that pays out in cash, Bloomberg reported in May.

The news of BofA’s bitcoin move comes as the market value of the global cryptocurrencies has dropped to $1.3 trillion from a high of more than $2.4 trillion in May, led largely by a selloff in bitcoin. Bitcoin traded below $32,000 on Friday and was headed toward its worst weekly performance in more than a month.

The crypto market has been struggling in part on the back of regulatory headwinds from China and the US. This week, Federal Reserve Chairman Jerome Powell said the US won’t need stablecoins and cryptocurrencies if the central bank were to issue its own digital currency.

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Goldman Sachs will reportedly offer ether options for clients as the firm expands its crypto-trading business

Ether
  • Goldman Sachs will offer ether options and futures to its clients, Bloomberg first reported.
  • “We’ve actually seen a lot of interest from clients who are eager to trade,” Mathew McDermott of Goldman said.
  • The bank also has plans to facilitate trades via exchange-traded notes tracking bitcoin.
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Goldman Sachs will offer ether options and futures to its clients as the investment bank expands its cryptocurrency trading business, Bloomberg first reported.

“We’ve actually seen a lot of interest from clients who are eager to trade as they find these levels as a slightly more palatable entry point,” Mathew McDermott, head of digital assets at Goldman, told Bloomberg.

He continued: “We see it as a cleansing exercise to reduce some of the leverage and the excess in the system, especially from a retail perspective.”

The New York-based bank is expanding from its bitcoin offering after restarting its cryptocurrency trading desk to trade bitcoin futures earlier this year amid a boom in the popular coin. Goldman first set up a cryptocurrency desk in 2018.

The 47-year-old McDermott also told Bloomberg that Goldman has plans to facilitate trades via exchange-traded notes tracking bitcoin.

Cryptocurrencies, led by bitcoin, have staged a modest rebound on Monday following its massive crash in May when it lost almost half of its market value in one week alone.

Yet a recent finding from crypto-asset broker Voyager revealed that 81% of respondents in a recent survey are more confident in the future of cryptocurrency following last month’s sell-off.

“Institutional adoption will continue,” McDermott said. “Despite the material price correction, we continue to see a significant amount of interest in this space.”

In March, that bank’s COO and president John Waldron said he has seen an increase in interest from his clients when it comes to investing in bitcoin.

“Client demand is rising,” Waldron said in a Wolfe Virtual FinTech Forum. “The pandemic has been a significant accelerant. There is no question in our mind there will be more digital commerce … and (use of) digital money.”

Read more: Goldman Sachs says buy these 37 stocks that will offer strong returns with minimal risk through year-end as growth names regain leadership

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SEC tells investors to be wary of bitcoin futures due to volatility and fraud, as regulators ramp up crypto scrutiny

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Gary Gensler heads the Securities and Exchange Commission.

  • The SEC warned investors over bitcoin futures, saying the cryptocurrency is volatile and speculative.
  • It also said the market lacked regulation and had the potential for fraud and manipulation.
  • Regulators around the world are stepping up their scrutiny of the market as bitcoin booms.
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The US market regulator has warned investors about investing in funds with exposure to bitcoin futures, saying the market is volatile, unregulated and has the potential for fraud.

The Securities and Exchange Commission released a notice on Thursday urging those considering bitcoin futures funds “to weigh carefully the potential risks and benefits of the investment.” The notice was issued with the Commodity Futures Trading Commission.

“Among other things, investors should understand that bitcoin, including gaining exposure through the bitcoin futures market, is a highly speculative investment,” it said.

“As such, investors should consider the volatility of bitcoin and the bitcoin futures market, as well as the lack of regulation and potential for fraud or manipulation in the underlying bitcoin market.” Futures are contracts that allow people to speculate on the future bitcoin price.

Regulators are stepping up their focus on bitcoin and other cryptocurrencies, which boomed in the first five months of the year before falling sharply in May.

Bitcoin traded at around $37,500 on Friday, around 42% below April’s record high, giving a sense of the volatility of the asset. Heightened scrutiny from Chinese regulators is one factor in bitcoin’s recent decline.

The SEC’s warning followed the suggestion from the top global banking regulator for tough new rules for financial institutions that have exposure to bitcoin.

Rule-makers and central banks have been warning for months about the dangers of cryptocurrencies because of growing concern that investors could get burnt in the bitcoin boom.

Analysts have said that the SEC’s concerns about the dangers of bitcoin investments make it unlikely that the regulator will approve crypto exchange-traded funds any time soon.

Osprey Funds founder Greg King told CNBC on Monday he thinks a bitcoin ETF in the US could come in 2022.

King, who plans to launch a bitcoin ETF in the US, said: “Personally, I think if something happens, it’s more likely in 2022. It’s just really getting going. These things take time.”

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JPMorgan says bitcoin is poised for a further slide after its 40% plunge since April – and sees echoes of the 2018 crash

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Bitcoin picked up on Monday after sliding the previous week.

  • JPMorgan said the fact that bitcoin futures have been trading below the spot price is a worrying signal.
  • The bank’s analysts said it reflected how weak demand for bitcoin was among institutional investors.
  • Bitcoin has rallied over the last two days, but was still around 40% off its April record high on Thursday.
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JPMorgan sees worrying signs in the bitcoin futures market.

The bank’s strategists, led by Nikolaos Panigirtzoglou, said the fact that bitcoin futures have been trading at a discount to the spot price – technically known as backwardation – is a sign of weak demand from big players.

“We believe that the return to backwardation in recent weeks has been a negative signal pointing to a bear market,” the strategists said in a note on Wednesday.

“This is an unusual development and a reflection of how weak bitcoin demand is at the moment from institutional investors that tend to use regulated CME futures contracts to gain exposure to bitcoin.” Futures are contracts that oblige the buyer to purchase an asset at a set price at a fixed date in the future.

Bitcoin has rebounded over the last two days and was up around 4% to $37,915 on Thursday. But it was nonetheless still 40% lower than April’s record high of close to $65,000.

JPMorgan’s strategists said their outlook for bitcoin was negative. They said another worrying signal was that bitcoin’s share of the total crypto market fell sharply during April and May from around 60% towards 40%.

Bitcoin’s lower market share is “a bearish signal carrying some echoes of the retail-investor-driven froth of December 2017,” they said. Amateur investors moved heavily into alternative coins as the crypto world boomed in 2017, but quickly withdrew from the market as it dropped sharply over 2018.

JPMorgan said the bitcoin futures curve was also in backwardation for most of 2018, when the cryptocurrency slid from around $15,000 at the end of 2017 to below $4,000 by the end of the next year.

Regulatory pressures are also building. On Thursday, the top global banking regulator recommended strict new rules for financial institutions holding bitcoin.

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CME Group, world’s largest derivatives marketplace, to offer micro bitcoin futures in May

Bitcoin
Bitcoin.

CME Group, the world’s largest derivatives marketplace, announced that it is expanding its suite of crypto offerings with micro bitcoin futures as the popular coin gains traction from both institutional to retail investors, propelling it to record highs.

The micro bitcoin futures of CME, or Chicago Mercantile Exchange, will be one-tenth the size of one bitcoin and will start trading on May 3, pending regulatory review.

The smaller-sized contract, which can be settled on a cash basis, will allow investors to trade bitcoin in an efficient and cost-effective way on fractional units. Other cryptocurrency exchanges that are less regulated already offer bitcoin futures.

“The introduction of micro bitcoin futures … will offer even more choice and precision in how participants can trade regulated bitcoin futures in a transparent and efficient manner at CME Group,” Tim McCourt, CME Group global head of equity index and alternative investment products, said in a statement.

CME Group launched a bitcoin futures contract in 2017 and has seen steady market participation among institutional traders. Micro bitcoin futures will join CME Group’s other offerings, including the recently launched ether futures.

“This will serve as a great function,” John Wu, president at AVA Labs, told Insider. ” It will increase participation, subsequently increasing liquidity, and, will provide hedging opportunities.”

Micro bitcoin futures will be listed on and subject to the rules of CME.

This far, CME said it has seen 13,800 bitcoin futures contracts (equivalent to around 69,000 bitcoin) and 767 ether futures contracts traded (equivalent to 38,400 ether) on average per day.

CME rival Chicago Board Options Exchange was the first to introduce the derivatives contract in 2017 but has since stopped trading bitcoin futures.

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