CRYPTO MOVERS AND PRICES
BTC and ETH are marginally lower this AM after reaching a new all-time high and touching previous record highs yesterday, respectively. The Valkyrie Bitcoin Strategy ETF (Nasdaq: BTF) begins trading today.
Crypto Story of the Day
Cboe Global Markets is acquiring crypto spot and derivatives platform ErisX. Ownership of ErisX provides Cboe with entry to digital asset spot and derivatives markets, including clearing and settlement.
On Wednesday, Cboe announced ‘it has entered into a definitive agreement to acquire Eris Digital Holdings, LLC.’ The deal’s financial details were not revealed includes Eris Clearing, ErisX’s registered derivatives clearing organization (DCO), and Eris Spot Market and Eris Exchange, its recorded designated contract market (DCM).
According to Cboe, the acquisition, expected to close in the first half of 2022, pending regulatory approvals, ‘presents a unique opportunity for Cboe to enter the digital asset spot and derivatives marketplaces through a digital-first platform….’ ErisX, founded in 2018 and based out of Chicago, was developed, focusing on regulatory compliance.
The platform was ‘built to mitigate common industry pain points and grow the digital asset market to a global scale.’ According to Cboe, while significant numbers of institutional investors expect to become involved with cryptocurrencies, ‘a lack of globally consistent regulation’ and ‘clearing infrastructure remain major barriers to entry.’ Cboe describes itself as being ‘uniquely positioned to offer a crypto marketplace focused on compliance and transparency ‘to help institutions embrace the digital asset class and offer digital asset trading to their clients.’
Cboe notes that it has secured the support of several market participants, including DRW, Fidelity Digital Assets, Galaxy Digital, Interactive Brokers, NYDIG, Paxos, Robinhood, Virtu Financial, which will form a Digital Advisory Committee with the goal of ‘advising several ongoing developments of the Eris spot and derivatives markets.’
Some members of the Committee also ‘intend to acquire minority ownership interests in Cboe Digital,’ the name given to the firm’s crypto business. Cboe launched BTC futures in December 2017, 8 days ahead of CME BTC futures' debut. However, the offering was discontinued in March 2019.
Cboe has posted consistently lower volumes compared to its counterpart CME. WSJ described the shuttering of Cboe’s BTC futures as ‘the latest sign that mainstream financial firms are losing their enthusiasm for cryptocurrencies.’ In May 2020, ErisX, which holds the status of the designated contract market, launched physically settled ETH futures. That contract, which has seen limited traction since launching, represented the first regulated ETH futures in the US.
Takeaway: Cboe’s announced acquisition of ErisX represents a significant commitment to the crypto space after the firm shuttered its BTC futures offering. When the firm discontinued the product, it wrote in a notice that Cboe is ‘assessing its approach concerning how it plans to continue to offer digital asset derivatives for trading.’
The deal also highlights the extent to which Cboe believes that institutional participation in crypto is underserved by current offerings. At the same time, the acquisition of ErisX reaffirms a pattern whereby incumbent financial actors find it most optimal to access the crypto space via deals and partnerships with crypto native firms.