World’s largest broker dealer says Bitcoin’s rise is stoking demand for crypto

TP Icap’s Duncan Trenholme got animated when speaking about a recent milestone in crypto — that he says went under the radar.

Earlier this year, CME Group leapfrogged crypto-native exchange Binance to become the largest exchange for Bitcoin futures contracts.

It happened even before US regulators slapped a $4.3 billion fine on Binance in November.

”That was huge. I don’t think that’s talked about enough in general,” said Trenholme, global co-head of digital assets at the world’s largest inter-broker dealer.

“It points to more traditional financial firms, more institutional firms, wholesale firms, coming into crypto.”

This move could be the beginning of a trend Trenholme expects to develop in 2024 — as the hard border between traditional finance and crypto begins to blur.

TP Icap, which matches buyers and sellers who trade more $1 trillion a day in a range of asset classes, has seen this first-hand.

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There’s been a steady flow of customers from across the firm’s business that are eager to onboard and trade digital assets — including customers from fixed income and equities, global markets worth a combined $200 trillion.

Record monthly volume

And the FTX scandal has helped lure traders from crypto-native firms, helping drive monthly volume at TP Icap to a record in October, Trenholme said in an interview at TP Icap’s offices in London’s Victoria area.

One big reason: “Price action that has been caused around Bitcoin, Bitcoin’s run recently and I’m sure, some of that is down to anticipation of the spot Bitcoin ETF approval.”

While trading slowed down in November, Trenholme says the firm has seen a boost in trading activity in wholesale regulated crypto asset derivatives for the last year and half.

“December has been more active than November for us on the derivatives side,” said Trenholme, who started off in equity derivatives at the firm and moved to crypto in 2018.

And in 2024, he sees more client interest coming for the crypto world as prices soar.

“We expect more focus on over the counter derivatives, non-deliverable forwards, over-the-counter options” he said.

Two big developments

Bitcoin’s more than 150% surge this year has piqued curiosity from investors old and new.

But two big events in 2023 have been clutch.

This year saw the New York trade association dubbed ISDA, or the International Swaps and Derivatives Association, incorporate key terminology for digital assets.

Another big step, Trenholme noted, was the introduction of the first International Securities Identification Numbers for digital assets. ISIN numbers are prerequisites for clearing, reporting, and settlement of trades.

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Bitcoin miners and Ethereum stakers

That has helped bring crypto into the fold of traditional trading structures, and has helped drive client demand, he said.

He sees increased interest in so-called hash-rate derivatives, financial instruments that offer volatility hedging for Bitcoin miners, as well as staking rate derivatives, that help with the interest clients earn when they stake Ethereum.

“We’ve seen more questions asked about those types of products,” Trenholme said. “We expect there to be a continued trend of our traditional customers either coming back to the market or getting into the market for the first time. If the market continues to be more of a bullish nature, then that’s only going to increase.”

It’s a trend that has been slowly but steadily gaining traction for about 18 months, he said, since the collapse of FTX and the US conviction of Sam Bankman-Fried.

The FTX effect

Since FTX, there has been a change in institutional investors’ attitudes — a “general shift in volume moving off unregulated offshore platforms onto regulated entities in major financial jurisdictions,” Trenholme said.

Among those also poised to cash in from this trend: Larry Fink, the boss of $9 trillion fund giant BlackRock, whose Bitcoin ETF is awaiting regulatory approval amid what he called a “flight to quality” in these trying times for crypto.

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His line was echoed by CME Group’s Giovanni Vicioso, who told DL News in November that the 125-year old Chicago derivatives exchange was able to jump above Binance thanks to punters seeking out regulated — and thus safer — alternatives.

Such a flight to safety following scandals, fines, and…