Bitcoin’s Growing Pains in Institutional Markets
Ed Tilly, the CEO, president, and chairman of the Chicago Board Options Exchange (CBOE), recently shared his thoughts on Bitcoin and its potential to welcome institutional investors into the crypto realm. He suggests there’s a missing link: Bitcoin exchange-traded notes (ETNs). Can you imagine Wall Street professionals lined up for an adventure on Bitcoin’s rollercoaster ride without proper gear? That’s how Tilly views the situation!
The Case for ETNs
In a recent statement reported by Business Insider, Tilly pointed out that Bitcoin’s listing market growth is being stalled due to the absence of trading products that engage the average investor, or as he called them, the “mom-and-pop” investors. According to him, the current Bitcoin futures market is not enough—think of it as trying to build a theme park without a thrilling rollercoaster.
The Roadblocks: Futures vs. ETNs
While futures are out there, Tilly cites them as having not reached their full potential mainly because they lack a straightforward exchange-traded product for retail traders. This is akin to serving a five-course meal to guests who only wanted popcorn. ETNs, by contrast, lower the barriers that keep average investors from joining the fun.
Investors Need a Safety Net
Tilly elaborates that giving retail investors a straightforward, attractive entry point is crucial. With prioritization on ETNs, institutions would be more likely to take on and manage their risks with the available tools—not just sitting on the sidelines, pouring over spreadsheets and pondering what-ifs! He noted:
“The power of having that future there is also having an ETN that is more attractive to retail, and then institutions can lay that risk off on the listed futures market.”
Regulatory Approval: The Giant Hurdle
What about those pesky regulators? Tilly addressed why they’ve been reluctant to approve a Bitcoin exchange-traded product, like the long-awaited ETF applications. Spoiler alert: it comes down to market manipulation. The regulators want assurance that they can protect investors from the dark corners of crypto where shenanigans happen. Until this is resolved, Tilly believes we will continue to hear the same refrain: “It trades every day, but it is not the story.”
Looking Forward
The landscape is evolving, but not fast enough for some. Well-known crypto entrepreneur Brian Kelly recently commented that a Bitcoin ETF approval in 2019 is about as likely as finding a unicorn in your backyard. Just as hope seemed dim, Bitwise Asset Management announced plans to apply for a new Bitcoin ETF with the SEC. Will this be the moment when the tides turn? Stay tuned!
