Bitcoin futures are barely more than two months old in the U.S., but one firm is providing professional investors with another avenue for shorting digital currencies.
“As institutional demand grows for cryptocurrencies, Genesis Global Trading is launching a digital currency lending business called Genesis Capital to enable investors to borrow bitcoin, ether and others for a fixed amount of time,” reports CNBC.
The minimum loan size is $100,000 and durations range from two weeks to six months, according to Genesis. Institutional investors can borrow bitcoin, ether, litecoin and other cryptocurrencies for the purposes of shorting.
Bitcoin futures debuted on the Cboe in December, followed by a launch on the CME. Nasdaq Inc. is still considering entering the bitcoin futures competition. After bitcoin, the largest cryptocurrencies are Ethereum, Ripple, Bitcoin Cash and Litecoin.
“Firms trading bitcoin futures or options find it advantageous to have bitcoin on borrow because they can short-sell those borrowed bitcoin to delta-hedge their long derivative positions,” according to Genesis Capital.
Derivatives help increase liquidity and improve markets for an asset category by allowing investors to bet on ups and downs of an asset, evening allowing individuals to adopt market-neutral strategies.
“Experts say the launch of the lending business is part of the broader buildout of the cryptocurrency ecosystem. As the futures market grows, analysts say, the desire to utilize trading strategies that allow you to hedge or find ways to arbitrage digital currencies increases,” according to CNBC.
On Tuesday, it was reported that Cboe Futures Exchange’s software was overhauled, which could clear the way for additional futures products on other digital currencies, but various media outlets could not confirm when bitcoin would get company in the futures market.
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