The growth of bitcoin, the flagship cryptocurrency, may be being hindered in listed by the lack of a trading product geared towards retail investors, according to Ed Tilly, the chief executive officer and president of the largest US options exchange, Cboe Global Markets.
According to Tilly, bitcoin futures haven’t seen substantial growth in trading activity over the lack of an Exchange-Traded Note (ETN), or a product that tracks the price of bitcoin that retail customers could trade. ETNs and futures are critical to each other, as they give both retail and institutional investors access points to a market.
ETNs, unlike futures contracts, are reportedly more accessible to average investors as they have a lower entry barrier. According to Business Insider, at a media luncheon this week Tilly stated:
The power of having that future there is also having an ETN that is more attractive to retail, and then institutions can lay that risk off on the listed futures market.
As the news outlet pointed out, the Cboe launched bitcoin futures contracts back in December 2017, a move that was soon followed by the Chicago Mercantile Exchange (CME). These were launched as bitcoin was trading at its all-time high near $20,000.
Bitcoin futures have, however, not been seeing significant trading volume growth. On Friday, January 18, the Cboe Futures Exchange had about 3,475 BTC futures contracts in open interest, an amount below the over 5,300 it had about a year ago. In comparison, Cboe’s Volatility Index (VIX) futures had an open interest of over 368,000 contracts.
As Business Insider points out this doesn’t mean, however, the cryptocurrency market hasn’t tried launching products to regulated exchanges like Cboe and CME. As CryptoGlobe covered, last year the US Securities and Exchange Commission (SEC) has rejected nine bitcoin ETF proposals based on bitcoin futures.
The SEC reportedly keeps rejecting these applications over concerns it would be approving something based on a market that’s out of its jurisdiction. Reggie Browne, who’s considered the ‘godfather’ of the ETF market, has in November revealed he’s bearish on a bitcoin ETF, for now.
Per Tilly, regulators face a difficult question with bitcoin ETFs:
How do I protect the US customer from manipulation in a market that I don't regulate? You answer that question, you get your first ETN.
The US government’s shutdown, the CEO added, isn’t helping, as right now the SEC and the Commodity Futures Trading Commission (CFTC) “are not taking calls.” Per his words, it doesn’t mean the Cboe isn’t interested in additional products, but means “nothing is going to happen in this government shutdown.”