Despite a deep bear market that brings memories from the aftermath of the Mt Gox debacle, NASDAQ is pushing ahead with its plans to list Bitcoin futures. NASDAQ partnered up with VanEck to launch the listing and the financial products that are linked to them. No on knows just how popular these products will be among mainstream investors, especially in light of the recent price drop, but NASDAQ has decided to push ahead with the listing in any case.
More Mainstream Funds Flowing into Bitcoin?
The hope for many is that traditional investors will pour into Bitcoin following the NASDAQ listing. That is expected to give Bitcoin price stability. A fiat influx will boost prices following the 2018 bear market, but the effect might not be the one most analysts expect. With the derivatives and competition from other exchanges – like the NYSE, which is planning to launch its own Bitcoin-backed contracts – Bitcoin prices could be the subject of further speculation.
The fact that futures and derivatives are based on holding contracts instead of the asset itself, might mean that the amount of fiat flowing into Bitcoin can end up being just a fraction of the total amount traded. With an asset that is so easy to hold and store, derivatives and futures lose most of their purported value as well.
Why Buy Derivatives on NASDAQ When you can Hold the Coins Yourself?
This is part of a wider philosophical approach to Bitcoin and cryptocurrencies as a whole. Traditional investors are used to regulated markets, in which there are trusted intermediaries and liquidity. Bitcoin has captured the imagination of many with its revolutionary take on how a monetary system should work, but as it did its price rose. That attracted those who are not necessarily aligned philosophically with Bitcoin. These actors are attempting to subsume Bitcoin under that flawed financial system that Bitcoin itself should be an alternative to.
Therefore, there is no real point in acquiring Bitcoin derivatives or futures on NASDAQ, because Bitcoin should become more valuable as the next fault line in the traditional financial system is exposed. Buying into a financial product based on Bitcoin, that comes from within that flawed system, is an oxymoron.
NASDAQ for Fiat Profits
Nevertheless, there seems to be enough people interested in these futures and derivatives contracts. Just like any other NASDAQ product, these are all based on the potential for fiat profits. Investors who want to play that game, will find an advantage there, and NASDAQ, as well as its partner, VanEck, will find a way to profit from the activity. The assumption that these financial products will bring in more liquidity, price stability or even a significant injection of fiat into Bitcoin, are perilous. To understand that empirically, one just needs to see what has happened with Bitcoin price stability and liquidity since the CBOE and the CME launched futures trading about a year ago. Mainstream listings are not an automatic antidote to the bear market.