Like many, the more I learn about the bitcoin and cryptocurrency markets, the more I see the future of the world economy. However, as a former market maker who started trading equity options on the floor of the Chicago Board Options Exchange in 2001, when it comes to trading in this industry, it seems a lot like the old days.
At the moment, there is so much talk about how Bitcoin can revolutionize the world, we almost approve of it. There is a seemingly endless list: it will transform the financial system; Providing banking to the bankless; Create a cheap and seamless global payment network while creating an inflation-free currency; Provide currency monetization of fuel, digital real estate and the Internet সব all while doubling costs. I could go!
But we don’t hear that much from a trader’s point of view and it might be a bit better for us Already seen.
A good place to start liquidation. It has improved significantly from where we were, but we are still in the early stages. The spot and futures markets have come a long way, especially in the case of Bitcoin. But when you trade, you usually find that the fees are much higher than you might get accustomed to when trading equities in America.
The bitcoin options market is still in its infancy. Deribit contains the most liquidity for BTC options, but it is unavailable to them in the United States. The Chicago Mercantile Exchange seems more familiar to traditional traditional U.S. investors, but at the moment still sees little order flow. With this in mind, we are seeing a wide spread between bids and offers, as the marketplace has been flooded with insufficient competition among market makers.
It all seems to be from the late 1990s and early 2000s, when certain exchanges had the right to trade certain equities, there was less competition, quotes were made in fractions instead of decimals, and implementation was as easy as we could see. Not today.
Which leads to organization. While we see more and more hedge funds and trade desks entering space, most people are still on the sidelines. Of course, this is changing rapidly, as space, stability, and confidence in Bitcoin increase with each new organization. And as institutions begin to flood, we will see much more of the past come to life.
This will mean improved regulation and the introduction of high-yield instruments provided by exchange-traded funds, structured products and asset managers, as well as a full-fledged industry of vendors specializing in providing services to organizations with risk-management software and data integration. All the while, DFI space will continue to compete, grow and replace the needs of middlemen.
That said, it must be noted that the cryptocurrency world has already created many new trading ideas. Everlasting future and eternal alternative – these are derivatives that never end. Exchanges that never stop – not for one second of the year. Real-time margin calls and transfers. Partial contracts are fully accepted. On-chain metrics provide data that was previously unavailable.
Eventually, these ideas will be integrated into the conventional market. Once everyone understands what is possible, it is only a matter of time before Bitcoin trading goes completely mainstream.
At the moment, many traders realize that they have been on the sidelines for a very long time and now is the time to seize and exploit the opportunities. It’s hard to predict what will happen tomorrow or this month, but experience makes me believe that in the years to come, Bitcoin and traditional cryptocurrency will look much the same. The only question is which one will affect the other the most. I don’t want to bet against Bitcoin.
This is a guest post by Patrick Baker. The views expressed do not fully reflect their own and BTC Inc.’s Bitcoin Magazine.