TD Ameritrade All-In With Crypto, Invests In Exchange
TD Ameritrade is all in with cryptocurrency even if the prices have been plummeting throughout most of this year.
One of the first online brokerage to offer investors access to CBOE World Markets and CME’s bitcoin futures in late December, it announced this week a strategic investment in ErisX, the cryptocurrency spot and futures exchange. While the Omaha, Nebraska brokerage wouldn’t say how much it invested and the stake it acquired as of a result, it did say customer interest in digital tokens is still high despite the state of the market in 2018.
Likening it to the heady days of the late 1990’s when anything with a .com slapped to its name garnered a lot of interest, Steve Quirk, executive vice president of Trading & Education at TD Ameritrade, said there was a day of reckoning for them similar to what’s going on with cryptocurrency. But just like the tech sector did, the digital token market should recover and surge. One only needs to look at the popularity of FAANG stocks for evidence. “A lot of people see the second iteration of crypto to be so much better,” said the executive. “It’s regulated and better understood. We don’t have the crazy volatility we had in the early days.”
Bitcoin Interest Still There Despite Plunge In Value
Rewind to last year, and bitcoin was setting new highs on a seemingly daily basis. The leading cryptocurrency at the time began 2017 trading around $1,000 and hit a high of nearly $20,000 toward the end of the year. That created near hysteria among investors with all sorts wanting in on the action. That drove the launch of the CBOE and CME bitcoin futures and for the likes of TD Ameritrade to come on board. But with regulators cracking down on the cryptocurrency market and bitcoin failing to take off with the masses, a subsequent decline in the price of it and other cryptocurrencies has ensued. At last check, bitcoin was trading around $6,545 and according to CoinMarketCap.com, the capitalization for digital tokens has been cut in half so far this year.
That prompted some of the discount brokerages to retreat. Worried the lack of regulation would present too much risk to their customers, leaders such as Charles Schwab and Fidelity Investments opted to take a wait and see approach to offering access to bitcoin.
TD Ameritrade Customers Want Regulated Way To Access Digital Tokens
TD Ameritrade, on the other hand, held steady in its support of the bitcoin contracts and with this week’s announcement is doubling down further. The appeal of ErisX to TD Ameritrade: its a regulated exchange. “The value of doing it with them is that they are one of the largest market makers in the space and have already set up a regulated exchange,” said Quirk. TD Ameritrade executives including Quirk and JB Mackenzie, managing director Futures & Forex at TD Ameritrade said the fact that the exchange is regulated by the Commodity Futures Trading Commission was necessary in order to get an investment from the brokerage.
“ErisX is creating what was a very interesting opportunity to have traditional capital markets with a legitimate regulated exchange that is bringing all the traditional partners on one centralized platform,” Mackenzie said. “Customers wanted to have the ability to invest in something that is transparent and that is regulated.” Another reason TD Ameritrade invested in ErisX: is expected to provide access to futures and crypto products including bitcoin, bitcoin cash, litecoin, and ethereum. Rival Coinbase, which has a market value of around $8 billion according to media reports, offers spot trading of bitcoin only. Mackenzie said the investment also presented an opportunity to make sure its customers are represented in any products ErisX launches since the exchange operator plans to tap the minds and opinions of its investment backers when developing its offering. “It’s a great way to make sure the cryptocurrency interests of customers are being met,” he said.
TD Ameritrade isn’t the only firm that is backing ErisX’s new derivative exchange and clearing organization. Virtu Financial, Valor Equity Partners, and DRW Venture Capital are among the handful of investors that have made an investment in the exchange.