Welcome to The Ask, where every week Crypto Investor interviews essential voices who do the work to make cryptocurrencies ‘mainstream’. Slightly edited exchange.
This week, Editor-in-Chief Michael Bodley spoke with Gary Worrall, CEO of Crypto Facilities. The UK-based subsidiary of Kraken specializes in derivatives trading. Worrall spoke about derivative flows and addressed the reaction to Bitcoin ETFs getting the green light in the US.
What kinds of exposures are European institutional investors looking for in terms of derivatives? What are you hearing from the market?
Worrall: (We were originally trading) as a stockbroker license. So, I mean, in a regulated way, I guess these products have been on the market for two, three years, maybe a little longer. You know, I think, as you probably expect, most of the volume and open interest is in Bitcoin and eth. I think there is a mix.
You know, I think our longest-term contract, for example, is semi-annual on Bitcoin and eth. I think there is not much demand for any longer at the moment. I think cryptocurrencies (move in) cycles sometimes faster than perhaps traditional ones. But we also offer a perpetual future, which is usually the most popular.
Obviously that’s a shorter time horizon. (The contract) is effectively settled automatically or renewed every four hours. Therefore, you could technically keep that position open for longer. But that is by far our most popular product.
Have you been paying attention to Bitcoin ETF approvals in the US? I wonder what the reaction has been in the UK.
Worrall: Yes, I mean, you will see that ETFs, I think, are an important part of the industry that matures and grows and allows new investors to access assets effectively. So we are keeping an eye on that as an industry as a whole.
For example, one of Kraken’s other subsidiaries, CF benchmarks. They provide the index for CME and us and obviously the ETF is effectively based on the CME contract. So, you know, we are all involved in having the same kind of infrastructure built behind the scenes effectively to deliver these products.
Where do you expect the flows to go in terms of derivatives in terms of volume until the end of the year? Looking ahead to next year, do you project an increase?
Worrall: 2021 has been a great year for us. I think we are 4x, than we already were in 2020. Obviously, you know, a lot of our volume is driven by volatility in the underlying (markets). (Towards the end of the year) there tends to be a bit more volatility, potentially. That is usually good for our business model. It’s hard to say … But I think we probably expect a strong end of the year.
What happens if a cryptocurrency bear market is further established and prices are suppressed? Do you think there will be less institutional interest if that happens?
Yes I think so. I mean, derivatives are still part of price discovery. Obviously, you know, when things are bearish, there is probably less interest in the liar asset and therefore there is less (money flowing into it in) overall, but I think there is still a place for people who have a broader vision or looking to trade a little more equity efficiently. So those things still hold up even in a bear market, even if the volumes are a bit lower, as you would see in all kinds of crypto products.
Welcome to The Ask, where every week Crypto Investor interviews essential voices who do the work to make cryptocurrencies ‘mainstream’. Slightly edited exchange.
This week, Editor-in-Chief Michael Bodley spoke with Gary Worrall, CEO of Crypto Facilities. The UK-based subsidiary of Kraken specializes in derivatives trading. Worrall spoke about derivatives flows and touched on the reaction to Bitcoin ETFs getting the green light in the US. Subscribe for the full article
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