The derivatives marketplace, CME Group, is reportedly launching Bitcoin and Ethereum reference rates aimed at Asian investors. It’s a move that highlights the growing institutional interest in digital assets, and in particular, the crypto enthusiasm surging from Asia.
These reference rates are used as a trustworthy source for a cryptocurrency’s price, playing a pivotal role in pricing settlement for future contracts. From Sept. 11, Asia-based crypto investors and institutions can use two reference rates that will track Bitcoin and Ethereum, published once a day at 4 pm Hong Kong time. The move caters to the need for more suitable time references for investors in Asian time zones, compared to the existing rates that are geared towards New York and London’s markets.
However, while equipping the Asian crypto market with these reference rates seems undoubtedly positive, one can’t but wonder about the implications of the overwhelming reliance on these rates. Particularly for the volatile nature of cryptocurrencies, this might potentially amplify the risk of massive sell-offs in case of a dire market climate.
CME’s crypto products head, Giovanni Vicioso, revealed that so far this year, 37% of their crypto volume was traded during non-U.S. hours, with 11% coming from APAC. Nonetheless, though the introduction of these rates could bring a more convenient way for institutions to precisely hedge cryptocurrency price risk, it also means a more significant number of market participants will be under the influence of these rates, potentially leading to uniform trading behaviors.
Demonstrating CME’s ambition to attract the growing Asian market, crypto enthusiasts believe that this could eventually result in further legitimization and global acceptance of cryptocurrency. It will be interesting to see how this development influences the crypto dynamics in Asia, affecting the context of regulatory clarity, which have been primarily achieved by Hong Kong and Singapore.
While this news is thrilling, it is equally critical to be cognizant of the potential pitfalls, particularly the market’s amplified vulnerability to abrupt swings caused by mass adherence to the reference rates. Further, how the regulators handle this increased crypto interest from institutions will significantly dictate Asia’s stance on cryptocurrencies.
The narrative remains split, hinting at a tug-of-war between enabling more market participants and centrally influencing market dynamics. Yet, amidst all uncertainties, one thing is certain – crypto fascination is steadfast, especially in Asia, painting a promising future for cryptocurrencies, regardless of potential stumbling blocks.
Source: Cointelegraph
