Nasdaq Enters the Race for Bitcoin Futures
Nasdaq Inc. has announced plans to introduce bitcoin futures in the near term, a sign that the the cryptocurrency arms race was intensifying among major exchanges.
The New York-based exchange expects to roll out bitcoin futures as early as next year, according to Bloomberg. In doing so, Nasdaq becomes the third major U.S. exchange to enter the burgeoning cryptocurrency market. A person familiar with the matter said the futures contract will trade on the Nasdaq Energy Futures (NFX) market, and become available as early as the second quarter.
NFX trades primarily in the energy markets.
By introducing bitcoin futures, Nasdaq will come up against stiff competition from the likes of CME Group and CBOE Inc. The Chicago-based options exchanges are planning to roll out their futures contract much sooner, and with greater institutional backing. However, that doesn’t mean Nasdaq won’t offer investors something unique.
According to Bloomberg, Nasdaq plans to differentiate itself from the competition by relying on more data for pricing the cryptocurrency. Pricing information will be drawn from VanEck, which recently pulled out of the market for a bitcoin exchange-traded fund (ETF). VanEck will supply Nasdaq pricing information from more than 50 sources. By comparison, CME will rely on four sources and CBOE just one.
The Nasdaq futures contract is also said to be better equipped to handle hard forks, a growing phenomenon in the cryptocurrency market. Hard forks are usually initiated when miners disagree about a planned upgrade in bitcoin architecture, leading to the creation of a new cryptocurrency. That’s how Bitcoin Gold (BTG) and Bitcoin Cash (BCH) came into existence.
The person familiar with Nasdaq’s plans said the exchange will reinvest proceeds from the fork back into the original cryptocurrency. This will make the process more seamless from the perspective of investors. This is particularly noteworthy, given that forks are highly volatile events.
Nasdaq’s entrance into the bitcoin market provides another legitimacy boost for the alternative asset. Once viewed as a shady and esoteric asset, bitcoin has catapulted into the mainstream in relatively short order.
Bitcoin prices have surged more than 900% year-to-date, with prices exceeding $11,000 on Wednesday for the first time ever. The uptrend is being fueled in part by expectations of greater institutional demand for the cryptocurrency stoked by CME and CBOE’s plans to initiate futures contracts.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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