The newest wave of cryptocurrency adoption is the biggest wave yet, solidifying the digital currency’s space as an asset class that has staying power, said Stanislav Kostyukhin, commercial owner – trader segment at Saxo Bank, two weeks after the launch of the bank’s new cryptocurrency trading platform.
Launched in 2009, Bitcoin has seen a meteoric rise, whilethere are now around 4,000 cryptocurrencies in existence, from so-called stable coins pegged to a fiat currency to joke or meme coins – e.g. Dogecoin.
“I definitely think that crypto can no longer be ignored as an asset class,” Kostyukhin said. “I think we’ve achieved critical mass in the sense of institutional adoption, the amount of capital investment. It’s still going through quite a turbulent process of price discovery, which we saw a week before the [platform’s] launch, but it’s very relevant today, and it can no longer be ignored.”
While investors shouldn’t plough all their assets into volatile digital currencies, it has a place in any well-rounded 100-year portfolio, he said.
Bitcoin dropped 30 percent in the third week of May, fuelling investor panic, though it has slowly clawed its way back, similar to how the digital currency has performed after crashes in 2013 and 2017.
On the volatility, Kostyukhin said that Saxo made the “deliberate decision” to enter the crypto space at this point.
Beyond the level of adoption and capitalisation in the market, infrastructure, regulatory and liquidity frameworks, and the sophistication of risk management tools have all developed significantly – even in the last six months – Kostyukhin said on the decision to launch the platform at a turbulent time for the asset class.
Stanislav Kostyukhin, commercial owner – trader segment at Saxo Bank
He expects cryptocurrencies to continue to stabilise as the supporting infrastructure and regulatory frameworks develop further.
Saxo Bank’s SaxoTraderGO and SaxoTraderPRO platforms allow clients to trade cryptocurrency derivatives, the latest platform to offer the trading of the contractual side-bet on the future price of cryptocurrencies.
Trading in derivatives exceeds the regular crypto spot markets by a factor of five, according to a study published by Carnegie Mellon University’s Tepper School of Business.
Saxo Bank launched Crypto FX pairs on May 31 in the Middle East and North Africa market, with clients now able to trade Bitcoin, Ethereum and Litecoin against EUR, USD, and JPY from a single margin account alongside more traditional asset classes.
He said that in the first two weeks of trading, the reaction has “exceeded expectations”, though he declined to share the volume of trading or how many clients had signed up.
On BitMEX, one of the first derivatives platforms launched in 2014, trading exceeds $3 billion worth of volume daily, the study showed.
Clients on the platform are allowed to sell long and short, taking advantage of the thrill that cryptocurrency’s volatility promises, but because the derivatives are swapped, traders are shielded from some of the fallout as the bank owns the digital assets.
Historically, the MENA market has been a hotspot for forex trading, which Kostyukhin said will extend to the cryptocurrency space.
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