Byte Me: Crypto flying right?

Surprising exactly no one, big beast exchange ICE has joined its peers and entered the cryptocurrency market in earnest. More than eight months after competitors Cboe and CME launched cash-settled bitcoin futures contracts, this month ICE revealed Bakkt, a “global platform and ecosystem for digital assets”.

  • By Costas Mourselas, Lewis McLellan
  • 08 Aug 2018
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The company is working with Microsoft, Starbucks and other organisations to make the platform a reality. It promises easy conversion of bitcoin to fiat currencies and brand new physically-settled bitcoin futures, a first among the large US exchanges. 

Cash-settled futures have acted as fun distraction for big investors looking to take advantage of the amusing price moves in the bitcoin market. Even if the eye watering margin demanded by some brokers may put a dampener on proceedings.

The new physically-settled contracts however, seem like good news for bitcoin miners, who commit computer power to helping verify transactions. They are rewarded with bitcoin for their efforts. 

In the same way that the big futures exchanges in the US help farmers and actual miners hedge their positions and guarantee a certain income from an upcoming harvest or coal dig, these contracts could help bitcoin miners guarantee the profitability of their mining operations as the cryptocurrency's price shoots up or down. 

A properly regulated conversion system for fiat to cryptocurrency could also be very useful for investors looking to swiftly exit their positions. It could prove an alternative to tether, a cryptocurrency that is supposed to be backed by the dollar. Tether has long acted as a quick safe haven for bitcoin investors. It's quicker to switch out from bitcoin into tether than into actual dollars, allowing investors to quickly lock in price moves. 

And despite speculation that Starbucks could be willing to accept bitcoin at its stores, a spokesperson has reportedly confirmed since that this will not be the case. If such a payment system does eventually emerge, the best guess is that ICE’s conversion system will help users quickly convert their bitcoin into dollars for buying their tall, half-sweet non-fat caramel lattes on the fly. 

What better way is there to convince your coffee buddies that central banks are dated, fat cat financial institutions at the root of all evil?

Attracting institutions

Perhaps the most significant part of the announcement is what is implied by the introduction of physically-settled futures of any sort. Just like with corn or coal, you need a warehouse of sorts to safekeep the cryptocurrency asset in question so that settlement can occur smoothly. 

ICE is working on that, and is looking into the security and settlement requirements unique to digital currencies. David Wills, COO at institution-focused crypto trading platform Caspian, said that the entry of financial institutions like ICE, Goldman Sachs and Northern Trust into the market were the "building blocks for the institutionalisation of the cryptocurrency market". 

"If you’re able to have these assets held by qualified custodians, that makes people much more comfortable to invest in the space, especially if there’s insurance attached to that as well," he added. 

Furthermore, while it may not be immediately obvious, ICE seems to be entering the cryptocurrency space in a way that Cboe and CME haven't dared so far. 

The company has highlighted that it will enable consumers and institutions to "buy, sell, store and spend digital assets on a seamless global network". This could mean that ICE will directly compete with unregulated exchanges that traditionally dominate the spot market. A cleaner spot market could also make a Bitcoin exchange traded fund an easier pill to swallow for the US Securities and Exchange Commission. 

Market moving or snoozing?

But an interesting element to the news is how little the cryptocurrency market has moved. Traditionally, especially during the euphoric rise of bitcoin between August and December, large financial players entering the crypto space would inspire a rally.

But the market capitalisation of cryptocurrenices has dropped from $278bn at the beginning of the month to $228bn on August 9. Bitcoin has also lost value, dropping from roughly $7,800 to $6,500. Perhaps, as suggested by two academics in June, the cryptocurrency market was previously manipulated upwards last year. Combined with the fear of missing out, markets were hyper responsive to moves.

Alternatively, perhaps bitcoin investors have begun to decouple institutional interest in cryptocurrenices from the success of the asset class itself. 

A cryptocurrency investor and blogger at website TotalCrypto.io, Tom Alford, Tom Alford told Byte Me that market sentiment had become more negative, making it more difficult to attract new investors and inspire big bull runs. He added that while ICE's initiative could bring liquidity to the market, physically-settled futures and ETFs “both involve the middlemen that bitcoin was meant to cut out in the first place”. 

Mati Greenspan, a senior market analyst at eToro, argued in a blog that ICE's new platform would be a good thing for the bitcoin network, resulting in more regulated cryptocurrency products and competition in the space.  

Whatever is driving the price of bitcoin, as of late, it is Wall Street, Chicago and soon Atlanta that are having all the fun, not bitcoin ideologues. 

  • By Costas Mourselas, Lewis McLellan
  • 08 Aug 2018

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
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1 Citi 344,551.82 1341 8.09%
2 JPMorgan 340,847.26 1467 8.00%
3 Bank of America Merrill Lynch 306,216.73 1054 7.19%
4 Barclays 256,667.84 965 6.02%
5 Goldman Sachs 227,311.51 769 5.33%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 BNP Paribas 47,043.60 195 6.55%
2 JPMorgan 46,108.71 102 6.42%
3 UniCredit 39,106.98 168 5.45%
4 Credit Agricole CIB 36,670.04 182 5.11%
5 SG Corporate & Investment Banking 35,773.91 138 4.98%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 14,088.48 62 8.97%
2 Goldman Sachs 13,469.15 66 8.57%
3 Citi 9,948.21 58 6.33%
4 Morgan Stanley 8,572.10 54 5.46%
5 UBS 8,391.04 36 5.34%