The Legacy Exchanges Want To Get In The Crypto Game
To investors,
Politicians on both sides of the aisle are coming together to support crypto. The industry has become too large and many of the participants are single-issuer voters going into November’s election.
But Washington DC is not going to be shown up by Wall Street.
The legacy finance industry is all-in on bitcoin, ether, and the rest of the industry. They realize this is where capital flows and new users are. These financial institutions want in on the action. Their wish was granted when the SEC approved the bitcoin spot ETFs. Next up will be ether. And then the long-tail list of coins will all be approved eventually.
Just a matter of time.
But there is still one area of the legacy system that is boxed out of participating at the moment — the legacy exchanges.
Yesterday, the NYSE President stated the following at the Consensus conference in Austin, Texas:
“If there was clear regulatory guidance [in the U.S.], it would be an opportunity to look at…The fact that you've seen $58 billion or so come to the ETFs has been a strong sign that the market is looking for regulation in traditional structures. So, hopefully, the [U.S. Securities and Exchange Commission] saw the inflows and said, 'Hey, this makes a lot of sense,' considering bitcoin ETFs have been a tremendous success.”
If you don’t think the major stock exchanges want in on the action, you are severely mistaken.
Coindesk’s Krisztian Sandor pointed out:
“NYSE's U.S.-based rival, the Chicago Mercantile Exchange (CME), a giant in regulated crypto futures trading, is planning to launch spot crypto trading to clients, the Financial Times reported earlier this month.”
This is one of the last giants to slay for the crypto industry. If the legacy exchanges allow for spot trading of these assets, there will be an incredible increase in the capital that flows into the industry.
Crypto assets have volatility and liquidity. Add in the fact that they also trade 24/7 and you have the perfect recipe for Wall Street to become obsessed.
What is interesting is that the legacy exchanges don’t have a free run into the market though. Bullish, a crypto exchange run by former NYSE President Tom Farley, is trying to get as much market share as possible. He was on the panel with the current NYSE President at Consensus yesterday.
Additionally, Coinbase is now offering derivates for oil and gold. That sounds like Coinbase may be preparing to enter the traditional market by way of the crypto market.
Ultimately that is where we are going to end up in my opinion — exchanges that allow you to trade the legacy assets alongside the crypto assets. One home for market participants to transact freely with each other. I wouldn’t be surprised if stock trading is expanded to 24 hours per day as well over time. Maybe we will need tokenization to make it happen, but maybe not.
The legacy market is on a crash-course with crypto. The exchanges are salivating over the opportunity to get in the game. And when they show up, the crypto market will learn what real size and liquidity looks like.
Hope you all have a great day. I’ll talk to everyone tomorrow.
-Anthony Pompliano
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Hi Anthony,
This letter on Legacy exchanges is excellent. I wonder why you think tokenization would or would not be needed for this 24 hour trading. Thank you.
Crypto exchanges need to do basic institutional things. For example, provide price transparency to their institutional clients, ie when they say their price is based on TWAP, they should be able to back it up with back testing and transparent documentation.