On 25 February, Crypto Facilities Ltd, a London-based brokerage firm, announced the launch of its bitcoin derivatives trading platform. The announcement was made by Timo Schlaefer, a former Executive Director in Credit Quantitative Modelling at Goldman Sachs, a PhD in Financial Engineering, and a Co-Founder of the above-mentioned company.
First of all, let’s look into the meaning of the word ‘derivative’. Bitcoin Magazine reads that “a derivative is a contract that derives its value from the performance of an underlying entity.” In this particular case, the exchange value of bitcoin is meant. “Crypto Facilities trades financial products such as bitcoin options, allowing users to “go long” and bet that the price of bitcoin will rise, or “go short” and bet the price will fall,” continues the above-named source.
According to the company’s press-release, the first derivative offered by Crypto Facilities is a forward contract. The Forward will hedge against bitcoin volatility serving to benefit from future swings in the bitcoin price.
“Our Forward is probably the simplest and most effective tool out there to protect yourself against bitcoin volatility. If you want to lock in the value of one bitcoin, you sell one Forward – that’s it. At the same time our market is extremely robust and secure. There is no central counterparty and all portfolios are marked to our proprietary bitcoin price indices,” said Jean-Christophe Laruelle, Co-Founder and COO.
As for the platform itself, it is backed by a high-profile team of experienced professionals from top investment banks and regulatory advisors. The Crypto Facilities press-release quotes Timo Schlaefer’s words:
“The bitcoin space still lacks professional, reliable marketplaces, and this is what we provide. We apply the same standards in terms of risk management, compliance and reporting as you would see in the traditional finance space.”
Schlaefer told CNBC that he saw real potential in the technology behind Bitcoin – the blockchain – which is a publicly-distributed ledger system that makes sure all transactions are verified in a transparent, decentralized and secure fashion.
Crypto Facilities Ltd is an Appointed Representative of Met Facilities LLP which is authorized and regulated by the Financial Conduct Authority. In addition, the release states, “The Bitcoin Forward is not a Specified Investment as defined in the Financial Markets Act 2000 and therefore not part of the firm’s regulated activities.”
The availability of mature financial products such as Crypto Facilities derivatives shows that Bitcoin is taken more and more seriously by the financial establishment and that – like or not – the Bitcoin space is becoming more professional and mainstream.