A startup exchange active in the derivatives market is expanding into bitcoin, the latest sign that market operators remain excited about cryptocurrencies despite bitcoin’s recent price slump.
LLC on Monday announced plans to offer derivatives on bitcoin and other “digital assets.” That makes it at least the sixth U.S. trading venue to jump into cryptocurrency derivatives in recent months.
Bitcoin’s price has fallen in half since hitting a high of nearly $20,000 in December, when investor mania for the digital currency hit a recent peak. But even with bitcoin’s value bobbing around $10,000, more financial firms have been eager to offer new products tied to the volatile digital currency.
Chicago-based exchange giants
Cboe Global Markets
launched bitcoin futures in December. Their contracts let traders bet on the price of bitcoin without directly holding the digital currency, all on a regulated marketplace.
Some lesser-known players have also launched or planned to launch bitcoin derivatives, including LedgerX, a startup bitcoin-options exchange; Cantor Exchange, a small trading venue owned by broker Cantor Fitzgerald LP; and Nadex, owned by London-based
has also said it is exploring the idea of introducing bitcoin futures.
Like its predecessors, trueEX is betting that Wall Street banks and money managers want to be able to trade bitcoin on a regulated market, without the risks that often come with cryptocurrency exchanges, such as theft.
The move is the latest gambit by trueEX co-founder and Chief Executive
a serial entrepreneur who helped bring derivatives trading from the phone to the screen over the past two decades and has more recently been eyeing opportunities in cryptocurrencies.
TrueEX initially plans to offer a type of contract called a “non-deliverable forward” linked to bitcoin prices. Such contracts are popular in foreign-exchange trading. They allow two parties to agree to pay each other in the future an amount based on the value of two currencies, such as the dollar and the euro.
The plan is under review by the Commodity Futures Trading Commission, which regulates trueEX, the company said in a statement.
Despite the budding interest in bitcoin, many on Wall Street are still wary of trading the cryptocurrency because of its uncertain legal status, as well as the risk that their holdings could be stolen by hackers. Investors have lost more than $700 million worth of digital currencies this year in hacks of cryptocurrency exchanges in Japan and Italy.
The bitcoin-futures market remains small compared with that for bitcoin itself. In February, about $75 million worth of CME’s futures changed hands each day, on average, while the comparable number at Cboe was around $62 million. Meanwhile, an average of over $1 billion worth of bitcoin changed hands daily on major cryptocurrency exchanges last month, according to blockchain.info, a bitcoin data and services provider.
Founded in 2010, trueEX isn’t the first exchange to try to launch non-deliverable forwards on bitcoin.
LLC, a startup trading platform, introduced a similar product in 2014 but it never gained traction.
Mr. Hirani has a history of building successful ventures. In 1999 he co-founded Creditex, one of the first electronic-trading venues for credit-default swaps—a type of derivative that can used to be bet on whether a company or group of companies defaults on its debt. Nine years later, he sold Creditex to
for $513 million.
He returned to his entrepreneurial roots with trueEX, which sought to take advantage of postcrisis regulations that pushed more derivatives trading onto electronic platforms.
The company is now the sixth-largest venue for the trading of interest-rate swaps in the U.S., having traded $9 trillion of them last year, according to industry group FIA.
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