The popularity of cryptocurrencies is increasing every year. This is due not only to Bitcoin, but also to traditional exchanges, which in every possible way stimulate interest in cryptocurrencies, and also attract new investors and traders. Over the past year, the demand for regulated crypto investment products has grown by several times.
Of course, media plays a significant role in the popularization of cryptocurrencies, but media and traditional exchanges work for different audiences. Media purposefully attracts small players, ordinary users who are not familiar with the rules of investing and trading. Traditional exchanges attract large players who intend to benefit from their investments. The more major players start working with cryptocurrencies, the higher their price becomes and the more they are used in the real world.
The growing variety of exchange traded products (ETPs) listed on traditional exchanges and the rapid development of indices have allowed more investors to access crypto assets without the complexities of owning and holding. Previously, big players had difficulties when dealing with cryptocurrency assets. Now everything has become much easier, more and more large investors are thinking about starting cryptocurrency trading. Suffice it to recall that when the price of Bitcoin began to skyrocket, a large number of private investors and large investment funds added this digital coin to their portfolios. Elon Musk and his company Tesla invested in Bitcoin and even announced the idea of creating their own cryptocurrency.
Germany, Switzerland, Canada, Austria, Sweden, Gibraltar – countries where you can easily access exchange traded products (ETP)
At the moment, access to exchange traded products (ETP) can be obtained in Germany, Switzerland, Canada, Austria, Sweden, Gibraltar. There are a number of countries that are awaiting approval for exchange-traded products, and with them large private investors and funds operating under the jurisdiction of those countries. It is also important to note that the launch or planned development of crypto indices by such giants as CME Group, CBOE, Nasdaq, Bloomberg, S&P Dow Jones, IHS Markit lays the foundation for various funds and platforms. This encourages more and more people and investors to enter the cryptocurrency market.
Traditional exchanges are intermediaries between different market participants, ranging from licensed issuers and settlement agents to data providers and custodians. This is why the growth and diversity of cryptocurrency investment products is highly dependent on the success of traditional and cryptocurrency exchanges. It is they, apart from the media, that most of all stimulate public interest in cryptocurrencies.
For example, at the beginning of 2021, the SIX exchange announced 22 cryptocurrency ETPs from seven issuers, and over time made a loud statement about a record number of transactions and turnover of the order book.
Another prime example is the Deutsche Boerse exchange. At the beginning of 2021, the Bitcoin exchange index on this exchange reported an average daily volume of 57 million euros, up from 15.5 million euros in the previous month and almost equaled the largest ETF volume on the exchange.
The willingness of various traditional exchanges to partner with crypto market participants and invest in the infrastructure needed to list various crypto products has spurred a group of ETP issuers looking to capitalize on the growing demand for regulated placements. Companies such as CoinShares, VanEck, 21Shares, FiCAS AG and WisdomTree are actively deploying crypto ETPs in Europe.
In the United States, exchange-traded crypto products faced a number of regulatory hurdles that prevented any government approvals from being obtained. The adoption of Exchange Traded Cryptographic Products (ETP) is now very difficult in the US. Regulators are harshly denying their approval to exchanges, citing a number of reasons. However, a powerful alternative has emerged, highlighting the ever-growing demand for regulated cryptocurrency investment vehicles – cryptocurrency trusts.
Cryptocurrency trusts are a type of fund that is managed by a professional management team. Accredited investors can invest in these trusts by purchasing shares over the counter. The use of cryptocurrency trusts reduces the number of regulatory requirements that investors face when dealing with public ETPs. This greatly facilitates the investment process for large market players.
The most prominent example of a cryptocurrency trust is the Grayscale Trust, which offers several assets related to the value of cryptocurrencies. The Grayscale Trust (owned by the Digital Currency Group) has gained tremendous influence on the cryptocurrency market and is showing an annual return of 200%. The Grayscale Trust enables institutional investments in the US through regulated crypto offerings. This cryptocurrency trust is the best proof that the demand for exchange-traded cryptographic products (ETP) is only increasing, and after all, ETP is not yet available on traditional exchanges.
However, OTC trusts have a number of disadvantages compared to traditional exchange-traded products: ETP markets are more liquid, which means that investors can easily enter or exit the markets without having to block funds for a certain period of time. The structure and rules of the ETP are fixed, which provides an additional level of security for the investor. That is why those investors based in Germany, Switzerland, Canada, Austria, Sweden and Gibraltar have an advantage over those who can only invest through cryptocurrency trusts.
It is safe to say that the approval of the ETP in the US will create significant difficulties for the business model of funds such as Grayscale. Investors tend to prefer the increased flexibility and efficiency that ETP guarantees on exchanges. That is why, if traditional exchanges get permission from the regulatory authorities, it will greatly affect the situation in the entire market.
State-level authorization of exchange-traded cryptographic products will hit trust funds very hard and may even question their existence. It is possible that they are the reason for the rejection of the adoption of cryptographic exchange products in the United States. Nevertheless, everyone is struggling with this problem: traditional and cryptocurrency exchanges, large and small investors, cryptocurrency enthusiasts. The pressure from the cryptocurrency community is only increasing and it is quite possible that they will soon win.
Cryptocurrency Indices Boost ETP
Cryptocurrency indices developed by exchanges and data providers over the past few years have spurred the growth and diversification of crypto investment products. Indices provide information on the price performance of an asset or a basket of assets and can be used to structure ETPs, funds and derivatives. They have a huge impact on crypto investment products.
For example, the CME Group cryptocurrency indices have allowed the launch of various futures and options contracts on BTC and ETH. Interest in CME derivatives contracts has grown tremendously in 2020 and at some point surpassed the interest in all other cryptocurrency derivatives exchanges. The huge success of CME Group’s crypto derivatives is the best example of how traditional exchanges are driving the spread of cryptocurrencies. CME Group derivatives have improved the overall market efficiency, which has encouraged more investors to participate in it. Accordingly, this contributed to an automatic increase in efficiency.
Other exchanges and data providers have already paid attention to this trend and are actively using it: CBOE, Nasdaq, IHS Markits, and S&P Dow Jones – they have either launched or announced plans to release cryptocurrency indices in 2021, which is sure to further increase popularity of cryptographic assets. The more high-profile and well-known traditional exchanges start talking about cryptocurrencies or creating cryptographic products, the faster the popularity of blockchain and cryptocurrencies is increasing.
In the US and Europe, the government has different attitudes towards the regulation of cryptographic assets. Europe is much more ETP-friendly, and the US is much more friendly to crypto derivatives and indices. This affects the cryptocurrency market in different ways. Crypto derivatives and indices are the standard for the market, but ETP is not. It is very strange that the United States treats them so categorically.
DeFi and CBDC are driving interest in cryptocurrencies and blockchain as actively as traditional exchanges
In addition to traditional exchanges, the distribution of cryptocurrencies is strongly influenced by hype topics – DeFi and CBDC. Even traditional exchanges have noticed this and are looking for ways to interact with DeFi and CBDC to capitalize on it.
The development of the DeFi market, which has been going on for over a year, has brought the traditional and cryptocurrency financial sectors very close. Every month, more and more fintech startups appear in the world that want to significantly change the world of financial services with the help of decentralized finance. The DeFi market allows anyone to become a direct participant in the financial market and receive high returns on their investments. This is what attracts a lot of interest in cryptocurrencies in general.
Development of CBDC is also expected. The largest banks in the world have already demonstrated their understanding of the prospects for CBDCs and their interest in issuing them. For example, Sberbank of Russia has applied for the registration and issue of the Sbercoin digital coin. In 2021, it is planned to conduct a series of tests of national cryptocurrencies in Singapore, Switzerland and Hong Kong.
The U.S. Securities and Exchange Commission has long vehemently rejected any crypto ETP proposals, rejecting ETF applications from Bitwise, Wilshire Phoenix, and VanEck. Europe has taken a much friendlier approach to ETP but has been tough on cryptocurrency derivatives. In Great Britain, for example, they were banned.
Suffice it to recall how the US Securities and Exchange Commission put an end to Pavel Durov’s TON project, which caused dozens of investors to lose their investments. The SEC resists the popularization of cryptocurrencies and blockchain in the United States, but one day society will break this position of the SEC and win a complete victory. Let me remind you that the ban on TON was actually unfounded, the project was closed simply because it was unprofitable for someone.
In the Bitwise and ETF Trends report on financial advisors, 47% of respondents noted that approving bitcoin ETFs in the US would make them more convenient for distributing cryptocurrencies across client portfolios, a sign that regulation is currently one of the biggest barriers to ways to accept it.
TON Crystal and traditional exchanges
TON Crystal is not yet traded on traditional exchanges, but it is very popular on cryptocurrency exchanges. The token is not even a year old, but it is being traded so actively. With the highest liquidity, the TON Crystal token is traded on CEX.IO, and the Bitcoin.com Exchange also demonstrates good liquidity. TON Crystal trading volume on March 15, 2021 – $ 5,628,467. Considering that the token has been trading for less than 6 months, this is a very good indicator.
The Free TON project plans to become more famous than Bitcoin and has all the possibilities for this. Considering that it has much greater scalability than all other projects, the Free TON blockchain can replace all existing centralized finance systems. TON Crystal has every chance of becoming the project with which billions of people will interact every day.
When TON Crystal can be traded on traditional exchanges, it will increase trading volume and total capitalization. This will be a very important event in the development of the project.
Conclusion – innovation only thrives when regulation allows
The world is still at the beginning of the path to fully legalize cryptocurrency financial products. The cryptocurrency community has to overcome a huge number of regulatory barriers hindering the popularization of blockchain and cryptocurrencies.
However, the adoption process is accelerating every year. Regulators and cryptocurrency exchanges, at least in some countries, are open to innovation. The rate of ETP applications has increased significantly over the past year, indicating that demand is growing.
As the regulatory framework clears up, the willingness of traditional exchanges to build infrastructure to support traded crypto products will help improve market efficiency.
Traditional exchanges have a big impact on how quickly cryptocurrencies will massively proliferate. They have long seen the trend in this direction and are trying with all their might to achieve success. The activity of traditional exchanges in relation to cryptocurrencies is attracting an increasing number of investors who have never worked with blockchain and cryptographic assets. It is hard to doubt that traditional exchanges are now as important to accelerating the spread of cryptocurrencies as the hype around DeFi and NFT.
By the way, a fun fact. Americans will pour $ 40 billion of “covid” payments into stocks and bitcoin. Analysts at the Japanese financial giant Mizuho surveyed 235 representatives of American households with annual incomes of up to $ 150,000. They were asked one question: how will citizens spend the new incentive checks from Biden?
40% of respondents will pour some of the “covid” payments into stocks and bitcoin. The priority is cryptocurrency. Bitcoin plans to acquire 61% of respondents. Mizuho researchers concluded that this investment could increase BTC’s current capitalization by 2-3%. So why is the US still resisting the popularization of cryptocurrencies?