Bitcoin has entered the awkward adolescence stage
Derivatives provide greater visibility into an opaque market, but there is no rush to embrace them.
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LAST autumn, as cryptocurrencies seemed on the brink of a linkage with the traditional financial system, there were predictions of a price explosion along with institutional, regulatory and mainstream acceptance of the currencies. Others predicted disaster or a collapse to zero value. In the end, despite some dramatic price moves, not much happened.
Still, liquid crypto derivative trading gives us a lot more insight into what might happen in the remainder of 2018. Derivatives give us greater visibility into Bitcoin price moves. Instead of relying on an opaque, fragmented market for price data, we have clean institutional-quality data on both prices and implied volatilities.
There were no disasters when cleared Bitcoin derivatives began trading. There were no technical failures or regulatory surprises. After some initial confusion, Bitcoin futures and options prices settled at rational levels relative to cash prices and volatilities. There was no massive selling by large holders cashing out of a Ponzi scheme, and no massive buying fuelling a bubble.
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