“The volumes at the Exchanges do not accurately reflect the interest we see from customers,” said Bob Fitzsimmons, Managing Director and Head of Futures at Wedbush Securities, about the bitcoin futures markets. Wedbush is one of the few clearing firms supporting bitcoin traders on the CME Group and Cboe Futures Exchange LLC.
We sat down with Fitzsimmons to discuss how Wedbush decided to support the cryptocurrency contracts, differences between bitcoin and other futures related products as well as where he believes the cryptocurrency market is going.
“We had a really compressed amount of time to think about this. There was a lot of controversy in the markets with JP Morgan’s Jamie Dimon calling bitcoin a fraud and Interactive Broker’s Thomas Petterfy saying it could bring down the entire economy,” said Fitzsimmons. “However, even with all the chaos, we were able to provide a smooth on-boarding process for our clients.”
Dimon and Petterfy have since backpedaled on their statements with Dimon changing his mind and Petterfy making comments that the launch of bitcoin futures will improve the reputation of cryptocurrencies.
Fitzsimmons addressed the uncertainty around this new asset class by comparing it to the rise of the Internet and how people couldn’t envision where the Internet was going at the time.
“I was in business school at the University of Chicago when I was first told I should buy a computer. I only needed it for two class projects and computers at that time were big, it took up my whole dining room table,” he said. “I remember thinking that maybe I didn’t need to purchase a computer and I could just use the school’s computer lab.”
The uncertainty does not scare Fitzsimmons. In fact, he finds all the resources, computing power and labor going into cryptocurrencies very promising.
“I had never met so many MIT grads, Masters and PhD’s in preparing for this product launch,” said Fitzsimmons. “All these smart people are working on this behind the scenes and I believe we will see steady growth in this area.”
He believes the underlying bitcoin markets, as well as other cryptocurrencies, are unique to most contracts listed at Exchanges.
“In other futures contracts, wheat or soybeans for example, you see the notion of supply and demand in action,” he said. “The crypto markets are more tectonic and we are still at a stage where we are trying to define the product. What is it? Some say it’s ‘gold with wings’ and others say it’s a protocol.”
Also, he explained that most futures contracts have a developed cash market but the spot market for cryptocurrencies is still evolving. There is no cost to carry or a delivery charge but there is a reference rate in bitcoin futures.
“The cash market has a variety of venues and prices,” he said. “And people in the cash market aren’t familiar with futures or shorting contracts. I think we will see lending of crypto growing in popularity soon.”
Being prepared to support investors in the cryptocurrency trading space has been a good strategy for Wedbush.
“People that had accounts at other firms, that did not support the bitcoin contracts, came to us and are now asking questions about other products,” said Fitzsimmons, such as the Hehmeyer Cryptocurrency Index Fund.
The Hehmeyer Cryptocurrency Index Fund is a new product that provides certain qualified investors access to the cryptocurrency market by investing in a fund that aims to track the performance of the proprietary Hehmeyer Cryptocurrency Index.
“I think Chris Hehmeyer had a good idea with the index because it’s a diversified investment,” said Fitzsimmons. “He has a tremendous pedigree and reputation and we are enthusiastic about the product.”
While cryptocurrencies are still a nascent market, it seems bitcoin futures have indeed helped their reputation. It is also promising that so many highly educated professionals and academia are in this space. Finally, the fact that Jamie Dimon and Thomas Peterffy have backpedaled on their original negative comments on cryptocurrencies is all very interesting.
With Bob Fitzsimmons comparing cryptocurrencies to the Internet, I wanted to take you back to 1994 with a clip of Today’s Katie Couric and Bryant Gumble questioning what is the Internet and give you an idea of what we might be in for…