FTX.US president Brett Harrison says the expansion of trading products will be crucial for the development of crypto asset markets.
In a lengthy thread, FTX.US chief Brett Harrison tells his 42,000 Twitter followers that US crypto markets lack specific features that allow investors to diversify their risk and hedge their portfolios.
“If one of the main purposes of a financial market is to allow for the expression and transfer of risk, the presence of derivatives is critical.
Crypto markets in the US will not reach the level of advancement, maturity, or safety seen in equity or bond markets without derivatives…
Among [the] features of an advanced market that the US crypto markets currently lack are:
The ability to easily hedge, insure one’s positions, speculate on volatility in addition to price, capture interest through basis trading, achieve capital efficiency through margin and achieve positions simply without requiring possession of underlying assets.”
FTX filed an application to enable margin trading for its derivatives platform with the Commodities Futures Trading Commission (CFTC) in March.
Harrison says that derivatives are imperative for allowing institutional participation in the markets because they allow investors to efficiently allocate capital across a variety of positions without holding the entirety of the underlying asset.
He also says direct custody of digital assets just isn’t feasible for institutions as of yet, which is another benefit of derivatives.
“Tools for effective risk management will remain limited, and crypto will not attract the institutional liquidity necessary to mature.
We believe our application to the CFTC to allow direct margin on FTX US Derivatives, FTX US’s regulated derivatives exchange, will greatly advance the development of crypto derivatives markets in the US.”