The net traffic flow may be from traditional finance to crypto, but inspiration goes both ways.
Yesterday Binance launched cash-settled BTCUSD quarterly futures contracts for web trading, due for arrival on mobile at a later date. Like other Binance futures, it’s tradeable with up to 125x leverage. But unlike any other, this is the first Binance derivative contract with a set expiry and settlement date.
This puts it in contrast with the more common-to-crypto perpetual futures trading of sites like BitMEX, and aligns it more closely with the more traditional Bitcoin trading stylings of names like Bakkt and CME.
This is no coincidence, said Binance Futures VP Aaron Gong.
Some traders are moving from traditional markets to crypto, bringing with them demand for the familiar functions of other markets. At the same time, some crypto innovations could make their way to traditional markets as the borders between crypto and currency get more porous.
Two way street
“With Tudor BVI investing in crypto futures, JP Morgan offering banking services to crypto companies (Coinbase, Gemini), Temasek Holdings joining Libra, we do see a strong trend of adoption from traditional markets,” Gong said. “I came from traditional markets and I see many familiar faces who used to trade traditional markets are now also active in crypto.”
“They find there are similarities when trading on Binance Futures as our products are not inversely designed, and the matching engine is stable and fast. In a broader sense, the strategies and principles of trading are similar in terms of competing on market-making and arbitrage. When we get into details, there are differences. Eg. in traditional markets they compete narrowly in fractions of a second. The crypto market structure is not at that stage yet.””
“Even so, traditional traders quickly get up to speed on our platform,” he said.
The time is especially right at the moment, given the burst of mainstream enthusiasm for cryptocurrency in recent weeks, Gong noted. The crypto derivatives space is still very malleable, so it’s a great time to try to help it evolve.
“We are fortunate to be able to innovate in the cryptocurrency space, to be able to drive meaningful change in money, one of the most fundamental aspects of society. So innovation is necessary to drive change and improve how we think of derivatives, and that mindset – to be open to new ideas – has to be across the industry,” he said. “There’s constant development in cryptocurrency and blockchain as a whole, which means the way we apply derivatives to a still-developing asset class must be flexible. Unlike physical gold or other commodities, Bitcoin and other cryptocurrencies have notable differences, for example, the way we store and transport them, so these differences need to be accounted for.”
At the same time, the evolution can also run back the other way. 24/7 trading in crypto markets could come to traditional markets if there’s enough demand for it, for example, Gong suggested.
“One difference between the crypto and traditional markets is that crypto is 24/7 (traditional markets follow normal business hours). There could be pressure from the crypto market for more innovation and competition in the traditional market,” he said.
The entire cryptocurrency ecosystem has to an extent always taken its cues from existing financial markets. The first Bitcoin futures contracts to go live all the way back in 2013, at long-defunct exchanges like ICBIT, were designed to help the fledgeling Bitcoin ecosystem better emulate the grownup markets. That the inspiration is now starting to flow the other way is one example of how much things have changed.
Disclosure: The author holds BNB, BTC at the time of writing.
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