The writing is on the wall. Nasdaq don’t want to be left behind and are quickly adapting. Acknowledging the frailties, the exchange’s Blockchain Product Manager, Johan Toll, said the fragmented nature and intermediary packed operations mutual fund business leads to slow transactions. So outdated are current technologies that fax machines are still in use and that is why he sees blockchain as a remedy. In his view, he is looking forward to a system where share issuance is instantaneous and done via the blockchain. Good news is, Nasdaq is testing such an efficient and fast system in Sweden.
Add this to recent events, it is clear that there is a shift in progress and leading this change is Nasdaq. The US based exchange is the second largest in the world. The exchange is also one of the most liquid mercantile whose data sources must be vetted. Recently, the Nasdaq launched the Bitcoin and Ethereum Liquid indices as they aid in bringing more reliability and preciseness of the asset prices of these two leading crypto assets.
What Bitcoin and Ethereum Indices Means
Because pricing is a major concern for the US SEC, the involvement of Nasdaq, a trusted exchange drawing their data from vetted firms relying on approved methodologies as they calculate index prices with all variable factored in, is definitely a move in the right direction.
In fact, all things constant, it could be a precursor for the eventual approval of the “elusive” Bitcoin ETF and other crypto derivatives drawing institutional traders according to Alex Ziupsnys. Alex is a leading crypto analyst:
“NASDAQ to add a bitcoin index on its platform. They are reading the writing on the wall and don’t want to get left behind. There is no stopping this. Adoption happens gradually right in front of you, until you finally pause, look around, and bitcoin is the dominant asset. This is big news. The launch of Nasdaq crypto indices could lead to regulatory approval for crypto-based derivatives in the market. And as a direct initial effect could mean more interest from institutional traders.”
Path to Crypto Derivatives Approval?
The US commission previously rejected Winklevoss application back in Q2 2018 citing risk of price manipulation while advocating for proper monitoring tools. Because of the open, global and largely unregulated nature of cryptocurrencies, the commission were in a way recommending broadcast of Bitcoin prices from a trusted firm—like Nasdaq—and not from traditional cryptocurrency exchanges where prices often fluctuate. This is so it is virtually impossible for all Bitcoin related transactions to be audited. In an extract, the commission said:
“The Commission believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products (“ETPs”) must, in addition to other applicable requirements, satisfy two requirements that are dispositive in this matter. First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.”
As the exchange gravitate towards tokenization, many are banking on Nasdaq to prop the markets since they have the experience, the tech and the infrastructure necessary to prevent manipulation of Bitcoin prices. Their participation could lead to proper and fair representation of asset prices. The medium-term effect will be renewed confidence in a market plagued by uncertainty. Approved pricing will surely draw institutional investors, deepening liquidity and increasing chances of a possible Bitcoin ETF approval.