Crypto Futures Are the Future at Kraken, Beyond: Some Takeaways
The cryptoeconomy may be down for now, but Kraken’s not miffed per its newest acquisition. The San Francisco-based exchange has purchased cryptocurrency derivatives platform Crypto Facilities in a whopping “nine-figure deal” that will bring cash-settled digital asset futures to Kraken. The move not only marks an operational evolution for the exchange — it also suggests the landscape around cryptocurrencies continues to mature.
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Kraken Pulls the Trigger on Regulated Crypto Futures
In an acquisition billed as creating “the world’s first crypto spot and futures exchange,” Kraken has bought up the London-based cryptocurrency derviatives platform Crypto Facilities for a price tag in excess of $100 million USD.
Crypto Facilities, which is regulated by the United Kingdom’s Financial Conduct Authority (FCA) and runs a top cryptocurrency index as well as futures for six digital asset trading pairs, has already been integrated into the exchange’s infrastructure, per Kraken CEO Jesse Powell.
“We are excited to introduce eligible clients to these industry leading futures and index products,” Powell said.
“Over the coming months, our teams will continue to enhance and expand these offerings. We’ve got great stuff in store for traders and institutional clients in 2019.”
For now, the available futures offerings will cover the trading pairs of BTC/USD, BTC/XRP, BCH/USD, ETH/USD, LTC/USD, and XRP/USD.
As for Crypto Facilities, it will stay a distinct company within the wider Kraken Group and will keep its operations in the U.K. capital where it will remain under the jurisdiction of the FCA, which has recently laid out a very permissive, albeit tentative, stance on “cryptoassets.”
Will Other Top Exchanges Follow Suit?
Binance just launched credit card purchases of cryptocurrency on its platform. Coinbase is reportedly interested in getting their own crypto ETF off the ground. Making money moves is, indeed, the name of the game.
Could these kinds of heavyweight exchanges be interested in following Kraken’s lead in opening up part of their operations to crypto derivatives?
Never say never, right.
There’s nothing definitive in play yet, of course, but Coinbase seems like a contender for doing so going forward. The popular U.S. exchange already saw an increasing compartmentalization of its operations in 2018 as its leadership sought to gun for institutional investors. If CEO Brian Armstrong and company continue down that path, moving toward crypto derivatives — whether through an acquisition or from scratch — doesn’t seem so far-fetched.
And as Bakkt and its big backers are in the early stages of their own bid to dominate retail and institutional crypto, Coinbase may eventually feel they have no choice but to embrace derivatives in some form or fashion amid the rising competition.
Bakkt’s forthcoming bitcoin futures product has been the talk of the space since last year, after all.
As for Binance, it’s a little bit more difficult to forecast. Sure, the company’s leadership has been open-minded, ambitious, and even nimble where its operations are concerned. And the exchange has made overtures to institutional users, like its launch of sub-accounts.
Yet company CEO Changpeng Zhao has said previously the exchange has been principally focused on crypto-to-fiat offerings and its forthcoming decentralized exchange as of late.
“We just want to provide a few key services in this industry,” Zhao told LetKnowNews last year.
“So, right now, we have a decent exchange, and we’re expanding both on the fiat and the decentralized exchange space. We want to continue to be a key player in the exchange space.”
That may be a no from Binance on derivatives plays for the foreseeable future, then. Lets see how others, like the Coinbases, Geminis, and itBits of the space, move accordingly in the next five to 10 years.
What the Rise of Crypto Derivatives Tells Us
Futures, or forward contracts, are mainstays in commodities arenas.
The rise of bitcoin futures and beyond since late 2017 suggests that cryptocurrencies are maturing toward mainstream financial instruments, at least in the eyes of those in and around the space.
It’s this trend toward the mainstream that Kraken has looked to leverage with their new crypto futures offerings and that enterprises like Bakkt are gunning to make big bets on.
Their call? Crypto futures and derivatives will only continue to get bigger as the cryptoeconomy continues to evolve out of its fledgling adolescence.
As for Bakkt, which is backed by NYSE-owners Intercontinental Exchange Inc., the platform recently announced the specifics of its repeatedly delayed bitcoin futures product, the Bakkt Bitcoin (USD) Daily Future. Such high-profile backers wouldn’t be spending time on such a product unless they thought there were major inroads to make on the horizon.
What’s your take? Does the Kraken crypto futures pivot bode a future where these derivatives become mainstream, or is that far from certain? Let us know in the comments section below.
Images via Kraken, Pixabay