I recently read an article that Blockchain's first major use case is as the stock market 2.0 and with the way things are going it looks like Bitcoin and other cryptocurrencies are emerging into a new asset class, cryptoassets. Technology stocks always had a significant impact on the market, and being a new asset class, Bitcoin is still in its early phases, a few perceive it as a hedge against traditional markets, but for the rest, it's still a speculative asset, but as its value evolves as a commodity, it would have more impact on traditional markets.
If you look at things from commodity perspective, Bitcoin as being a mainstream financial investment, then institutional money is good, it's not just about futures, but recently Robinhood announced plans to enable Bitcoin trading, NASDAQ futures plan, similarly if some major firms allow Bitcoin trading, it would give Bitcoin much more credibility and legitimacy as an investment/commodity. I think institutional money might decrease volatility and give more stability and liquidity, but yeah, the downside is the possibility of manipulation along with somewhat a barrier for small investors to get into the market, and even though a disrupting technology, commodity adoption might have more speculation than technology/fundamentals. This is where IMO the currency aspect is necessary.
I like what you are saying. So it is not just about the manipulation, but more than that, it is about the credibility and legitimacy as an investment/commodity on global stock markets. In your opinion, what would be more beneficial to Bitcoin?
Bitcoin Futures or
Bitcoin ETF's?
Being such a small fish in the pond, would institutional money suffocate Bitcoin or would it strengthen it's growth. I see a situation where big Wall Street traders will only replace the old Bitcoin whales.
The CME Bitcoin futures are cash-settled, no physical delivery, betting on Bitcoin's price movements, it might or mightn't create an actual demand for Bitcoin. But in case of an ETF, traders don't have to buy the asset, but are buying ETF shares while the underlying asset is held by a trust and traders can redeem their shares for the underlying asset, there is actual demand. So definitely ETF's would be more beneficial than cash-settled futures. The US Senate hearing, although optimistic wasn't much forthcoming about approving a Bitcoin ETF anytime soon.
Cash-settled futures market and Bitcoin market, different markets, but yeah manipulation/shorting is quite possible, institutional investors will directly invest into Bitcoin, unlimited supply of fiat and ideologically driven Bitcoin holders, that's something we have to see. I think it's too early to evaluate the effect of futures market on an unregulated Bitcoin market.