As if timed for the momentous occasion of bitcoin topping $10,000, news broke Wednesday that Wall Street eminences Cantor Fitzgerald and Nasdaq Inc. will soon follow the lead of their Chicago peers CME and CBOE and offer bitcoin futures trading on their exchanges. Though not terribly surprising, the development represents the next logical step in the progression of cryptocurrencies from an unspeakable heresy to Wall Street plaything.
The problem is, we're only, like, a quarter of the way there. At best. Look at what CME is doing: cash-settled futures. No transactions will be added to bitcoin's public ledger, no cryptographic hash algorithms solved. Instead it'll just be a reference rate floating somewhere a safe distance away from naturally occurring bitcoins in the wild. Futures traders won't get true exposure to the asset, just wagers on a number that get tallied and settled at the end of the day.
Boring. Enough patting yourselves on the back with this bitcoin futures stuff, guys. It's a necessary part of the process, sure, but it's not really truly bitcoin. Bitcoin is placing an order and waiting 9 days for it to go through because bitcoin's infrastructure is so fundamentally unsuited to its purpose. Bitcoin is lying awake at night wondering if the exchange holding your money will be the next to go up in smoke. Bitcoin is faith.
So who's it gonna be? Which major bank will be the first to say damn the consequences, we're going to make a market in this bonkers speculative bubble because that's what the client wants and we'll be damned if that's not what the client is going to get?
Bankers have their obligatory objections, and they're understandable. Bitcoin currently occupies a regulatory Twilight Zone. It's catnip to hackers. It's doesn't really represent that much money. It's plumbing consists of an invisible archipelago of private and at-times illicit operators in far-flung jurisdictions of questionable stability. Its very existence is a fuck-you to bankers. Etc.
It shouldn't be hard to wave these all away. Who cares about the crypto-anarchist rhetoric; there's money to be made. Ignore the befuddling decentralized architecture; it just kind of works. Note that bitcoin now has a market cap of $160 billion; that's a lot. Accept the hacks; whatever. And remind yourself that this is the Trump era of regulation. There's still at least a few years of fun ahead.
So much for the costs, what about the benefits? Right now it's just dumb money and a few marginal hedge funds dicking around with cryptos. Think of how much cash an experienced investment-bank trading desk could harvest with a diligent high-tech bitcoin operation. And what better answer to the constant complaint of low volatility than this one-day chart:
So who's it gonna be? The obvious choice, of course, is Goldman. Millennials' favorite bank has a CEO who can't stop tweeting about bitcoin and a commodities research head who just wondered aloud on TV “why there is all this hostility” to it. The bank is in the midst of a wide-ranging reinvention and has already reportedly looked into setting up a crypto desk. So why not go ahead and take the plunge? Call it rational exuberance.
“Something that moves up and down 20 percent in a day doesn’t feel like a currency, doesn’t feel like a store of value,” Blankfein said Thursday in an interview on Bloomberg Television. “If it works out -- and it gets more established, and it trades more like a store of value, and it doesn’t move up and down 20 percent, and there is liquidity to it -- we’ll get to it.”