New York-based blockchain startup Consensys has partnered with an affiliate of marketplace trueEX known as trueDigital Holdings (TDH), to develop a benchmark price for ether, Ethereum’s cryptocurrency.
The March 12 press release mentions that Consensys and TDH will have a reference index price for ether. Ether is currently the second largest cryptocurrency with a current total value of more than $68 billion in market capitalization while bitcoin and ether reach a market capitalization of $220.6 billion according to CoinMarketCap.
TrueEX announced their partnership with Consensys along with a plan to launch a regulated derivatives marketplace for digital assets. Although trueEX is the first exchange approved by the Commodity Futures Trading Commission (CFTC) as a designated contract market for swaps, trueEX is still awaiting approval from the CFTC for contracts.
Once approved, the first product released will be Bitcoin-based non-deliverable forwards (NDFs) settled in USD and listed under the trueDigital brand on trueEX’s swap platform.
TrueEX is well known for their innovative practices. Apart from winning the OTC Trading Platform of the Year at the Risk Awards, since their launch, they’ve reported trading volumes of over $9.7 trillion.
A Regulated Marketplace for Digital Currencies
According to Sunil Hirani, founder of TDH, despite an increasing interest in digital currency related derivative products, the existing cryptocurrency ecosystem lacks the institutional involvement that trueEX can bring.
“Institutional investors and commercial partners are ready for a regulated and liquid marketplace to gain exposure to and hedge these increasingly important digital currencies and commodities, but the marketplace is sorely lacking the necessary foundation, infrastructure, and platforms that institutional investors have come to expect in other important markets,” said Sunil Hirani, founder of TDH.
According to the press release, TDH’s partnership with ConsenSys will support the “infrastructure needed for the broad adoption of digital assets by the institutional community.”
Minimizing Risk for Institutional Investors
TDH is currently working on developing the infrastructure to fill the existing demand in the market for institutional investors. With a proper derivative marketplace and clear benchmark prices for volatile digital currencies, TDH would significantly minimize the risk currently associated with cryptocurrency investments.
Although cryptocurrencies remain highly unregulated and the lack of a regulatory body can deter a lot of institutional investors, Brooks Dudley, Vice President of Risk at ED&F Man Capital Markets, the first FCM with plans to offer prime brokerage services for digital asset forwards on trueDigital believes:
“NDFs on digital assets are the logical next step for institutional investors who are seeking exposure to Bitcoin and other digital currencies.”
While institutional investors are currently avoiding the crypto space, trueEX’s attempts to minimize the risk could according to the press release, “deliver the confidence and transparency institutional investors have been seeking.” They may even potentially have a large impact on cryptocurrency prices and could even balance out the large whales in the existing market. Despite reducing the associated risks with cryptocurrency investments, Institutional investments are dependent on the advisor and whether they are comfortable or have familiarity with the cryptocurrency space.