Bitstamp Leads European Charge Into Bitcoin Futures

Blockchain, FinTech, Investing, News, Regulation | November 30, 2017 By:

Luxembourg’s Bitstamp is one of Europe’s major cryptocurrency exchanges, facilitating trading in US dollars and euros for bitcoin, ethereum, Litecoin and Ripple. The company is headed by CEO Nejc Kodrič, who co-founded the company in August, 2011 with Damijan Merlak.  In April, 2016, the Luxembourg government granted a license to Bitstamp to be fully regulated in the EU as a payment institution, allowing it to do business in all 28 EU member states. 

Bitstamp is now entering the futures market for bitcoin. CEO Nejc Kodrič talked with Block Tribune about that and the state of bitcoin in this era of wild rides.

BLOCK TRIBUNE: Tell me how a Bitcoin futures market would work?

NEJC KODRIC:  So, first of all, we run a spot exchange, meaning if you buy bitcoins, you actually earn those bitcoins. So you can withdraw them through either your phone, your mobile wallet, whatever. In terms of futures, it’s a derivative, so there is no delivery on an actual bitcoin. So it’s a financial instrument, which makes it easier for experienced traders to trade, because there’s no overhead of storing bitcoins and managing private keys. I mean, pretty much, you have futures for anything, for trading anything. So professional traders are used to trading derivative product instead of actual underlying assets.

BLOCK TRIBUNE:  What will they be looking at to determine potential prices? Bitcoin seems to swing, a lot of times, without any real purpose, essentially.

NEJC KODRIC: Actually, there is a purpose, it’s purely a situation of the market, demand versus the supply. Whereas, supply is fixed according to one of the basic principles on the blockchain, on bitcoin. And demand kind of varies, you know, if there is more publicity, there’s probably more price movement. That draws additional demand by users, traders, speculators.

BLOCK TRIBUNE:  The stock market seems to react to things like storms or international incidents, whereas bitcoin, yes it’s supply and demand, but there’s nothing that you can point to, essentially saying that this is probably what’s going to happen, no? Or is that an erroneous assumption?

NEJC KODRIC: Well, that’s not necessarily true. There were cases where traders used bitcoin as a hedge against whatever the hedge was against. For instance, I’ll give you an example, a couple weeks ago, maybe even months ago when, maybe this is unrelated so just between us, but when North Korea launched a missile there was a huge spike on the market, so who knows if that’s actual correlation or not but you know, there are some indications that traders use bitcoin as a hedge in terms of uncertainty in the market.

BLOCK TRIBUNE:  Okay, fair enough. So, talk to me in general, when do you see institutional investors getting into bitcoin in a big way?

NEJC KODRIC: I don’t know what you mean exactly by in a big way, but there’s been presence of institutional investors for quite some time now, and it’s just been more and more adopted by mainstream traders to trade bitcoins as well. It’s an underlying asset. It’s this kind of digital asset that’s been; which underlying technology is blockchain, which has been working uninterruptedly for nine years, so I think more and more traders are treating bitcoin as one of the assets in their portfolio.

BLOCK TRIBUNE:  What will be the effect of countries like Russia developing their own sovereign cryptocurrencies?

NEJC KODRIC:  I think that’s just one of the way that they will digitalize their existing currency. Using blockchain technology to have their own digital currency, so I don’t think that it will have any international impact whatsoever, because point of crypto currencies is that there’s no central authority that supervises and tells which transactions are good and which are not. That’s all done by miners. And this kind of element of democracy in the system. So If you have a nation, which is Russia as you mentioned, they’re probably not… lets just say they’re not known to have a very open monetary system, so they like to have control over things. So, its highly likely that they will run their own cryptocurrency where they have all the control.  

BLOCK TRIBUNE:  Do you see cryptocurrency as a vehicle for transactions?  Or is it going to remain a store of value for the near future?

NEJC KODRIC: Cryptocurrencies in general, bitcoin specifically, I don’t think so. I view bitcoin more as a kind of digital asset. It’s good for storing money, it’s easy to store it, it’s free to store it, it’s very cheap to transact it, and no one can see it, so it makes it a good safe haven in times of uncertainty. If it’s good for day to day transactions? I don’t believe so. I think we’ll have, in coming years, there will be other systems, which will be more used for day to day payment. I’m not sure if we are quite there yet, but I wouldn’t bet my money that bitcoin is going to be used as a currency on a day to day basis.

BLOCK TRIBUNE:  Put on your prediction hat not. Tell me what you foresee happening in the next six months in bitcoin.

NEJC KODRIC: In what terms?

BLOCK TRIBUNE:  Any terms you want to talk about.

NEJC KODRIC: I don’t like to predict the price. But I think we’re just seeing more and more and more adoption from mainstream financial institutions. I mean, this has all been happening behind the scenes, so I think we will just see more and more of that coming out to the public eye. So I think that’s what we can expect for the next six months. 

 BLOCK TRIBUNE: Are you one of those people that believes that fiat currency will some day go away and be replaced by digital currency or is that science fiction?

NEJC KODRIC:  Okay, I am libertarian but not that libertarian. I don’t think there will be a government, which will have a monetary system that they cannot control, but I do think that we will have solid, robust alternatives in terms of crypto currencies. So I think there will be nations on the planet, which do not have a functioning monetary system, to use bitcoin or any other crypto currency as an alternative. So I do believe that will happen to some degree, or already happening, but I don’t think we’ll see a worldwide adoption of crypto currency and you know taking down governments and banks.

BLOCK TRIBUNE:  What’s going on in China right now as far as attitudes go? Do you think that their cracking down is temporary or do you foresee this as a long term issue for them?

NEJC KODRIC: I think China was kind of a wild west in terms of crypto currencies for the past couple of years, so I wouldn’t say that there is a crackdown. It was called for that someone would step in and make some order because there was suspicion of market manipulation in China, there was all sorts of exchanges not doing any terms of [inaudible 00:08:33] policies. So, it was wild west to say the least. In those kinds of circumstances, it’s quite dangerous for casual, not knowing investors to lose money because they do not know what they’re getting into. I think we finally solved the answer to it.

In hype, possibly we’ll see a new era emerging where there will be clear guidelines on how an exchange has to operate in order to exist in China. And this is probably happening right now.

BLOCK TRIBUNE: What about Japan, which is wholeheartedly [inaudible 00:09:38]? What do you foresee there? Will they become the model for the world?

NEJC KODRIC:  I wouldn’t say they will become a model for the world, but what we’re seeing is, exactly, a couple steps ahead of China in terms of they’ve given out, I think, eleven licenses to exchanges. What this means is, these exchanges have to build policies and procedures and will now have to enforce them on a daily basis, which brings security to the investor.

These exchanges will have to follow strict correctional policies, they’ll have to their financials audited, you know, pretty much bringing them up to a standard, which at the end of the day means more security for the consumer.

BLOCK TRIBUNE:  Where do you stand on initial coin offerings? A good thing? Bad thing?

NEJC KODRIC: I don’t like it. I think in terms of technology and kind of the alternative to existing ways of getting financed, it’s good, it’s pretty clever, but the way that this is being carried out and implemented, it’s crap. Don’t quote me on this. I would say it doesn’t work as it should. Usually, if you have a project of your own, if you want to start a company, you invest some of your money, time, effort, know-how, and you start a business. And if you need financing, you go to VC’s and ask for some financing. Here, it’s kind of the other way around. So, first, you get funding, which by default 30 percent is already yours, which is kind of the common practice these days, and it completely messes up the incentives.

It’s too easy to get funding in the ICO world, and many people are abusing it. Most of the people, which are investing in ICO’s don’t even know what they’re investing in. They just speculate of the price of an underlying issued token. What they should be thinking of, is the business that I’m investing in, is this ICO that I’m investing in actually going to make any money? Do they have strong governance? Has anyone checked what the technology that they’re advertising is bringing? Are they solving any problem? And most of the time the answer is no. They’re a bunch of investors who are fooled, they invested savings into this token, which has probably no underlying value, honestly. So I’m against it.

I think if there would be kind of a framework, where one could apply to have their project tokenized, if there would be like a regulatory body that would check what’s behind the actual business, it would be a good way to get funding. I like to support Kickstarter campaigns, but in the return I get a product, but I would like to get a share, so by getting a token in the regulated environment makes me a possibility to liquidate my investment in one of these companies whenever I feel to. So, I think in terms of invention it’s okay, it’s great, but in terms of the actual how it’s being used, it’s terrible.