July 24, 2018

Institutional Investors Swap Bitcoin Futures for Physical BTC in Wall Street First

bitcoin took a significant step toward becoming a mainstream financial instrument this week, as two institutional investors completed the first-ever exchange for physical (EFP) transaction involving bitcoin futures.

The CME EFP bitcoin transaction, facilitated by E D & F Man Capital Markets, a registered futures commission merchant, and itBit, an institutional-grade cryptocurrency exchange, saw two institutional traders swap a position in CME’s bitcoin futures market for an equivalent amount of the “physical” asset itself.

Wall Street traders use EFPs to hedge their futures positions and diversify their exposure to specific assets. They may also provide firms with leverage, capital, tax, and liquidity benefits. EFP transactions are negotiated off-exchange, often with the assistance of a broker, and then reported to the exchange for settlement.

While common in commodities trading, itBit and E D F & Man said that this transaction marked the first time that an EFP has been reported to a U.S. futures exchange where the underlying physical asset was a cryptocurrency.

Commenting on the trade, Brooks Dudley, of E D & F Man Capital Markets Inc., said that it marked an important step in the maturation of bitcoin as a regulated asset:

“Every day we facilitate EFPs for our clients in physical assets such as soybeans, wheat and treasuries. EFPs on CME bitcoin futures mark an important step forward in the maturity of the regulated derivatives market for digital currencies.”

Paul Ciavardini, director of itBit’s over-the-counter (OTC) cryptocurrency trading desk, added that institutional solutions such as EFP trades will “continue to reduce the friction” in the cryptocurrency marketplace.

The trade is also noteworthy because, as CCN reported, the U.S. Commodity Futures Trading Commission (CFTC) has thus far only approved bitcoin futures products that are cash-settled, meaning that investors receive the cash value of bitcoin when a contract expires, rather than the physical asset itself. With the availability of EFPs, they will have more flexibility in how they interact with this nascent asset class.

Featured Image from Shutterstock

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Published at Tue, 24 Jul 2018 21:27:25 +0000

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Bitcoin Price Watch; Hedging The Dips

So that’s another day of trading complete in our bitcoin price trading efforts and there’s really only one word for what’s happened in the bitcoin price (and, indeed, across pretty much the entire crypto spectrum) – bloodbath. We’d love to be saying that we’re heading into the festive period on a high and, in turn, that there’s plenty to be excited about moving forward into the new year. One of these things is true. The latter one. The first, not so much.

Anyway, there will be plenty of people complaining today so let’s not add to the list – instead, lets’ try to take advantage of the action we are seeing with some nimble intraday trades.

So, then, as ever, before we get started, take a quick look at the chart below to get an idea where things stand. It’s a one-minute candlestick chart and it’s got our primary range overlaid in green.

As the chart shows, then, the range we are going to be using for the session today comes in as defined by support to the downside at 12422 and resistance to the upside at 12670.

We are going to stick with our standard breakout strategy (that is, in and out on breaks and subsequent closes above and below key levels) so our two target trades for this evening are as follows:

We’ll be in long towards an immediate upside target of 12800 if we see price close above resistance. A stop on the trade somewhere in the region of 12630 will ensure we get taken out of the position in the event of a bias reversal.

We will try and get in short on a close below support, targeting 12350 to the downside and placing a stop at 12440 to keep things tight from a risk management perspective.

See you on the other side.

Charts courtesy of Trading View

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