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Some of the Libra Association members reduce their project participation level. Bakkt deliverable futures are not in the great demand. FinTech companies’ shares boosted explosively on the Chinese market.
Massive criticism from the American and European officials has reached its goal. A wide range of companies that initially supported establishment of the Libra Association are reviewing their plans for the project participation. In particular, this was announced by Visa and MasterCard. Moreover, they are concerned not about the volume of expenses upon joining the association mostly, as about the loss of support from the authorities and also possible regulators’ claims.
The Libra Association is a non-profit organization headquartered in Geneva, Switzerland. It was planned that it will manage the new cryptocurrency, and Facebook will be on an equal footing. The association should have included about 100 corporations, charitable societies, and technology and information business representatives.
As planned by Facebook, each of the project participants should have invested $10m for its development. However, actual situation has made its adjustments. Strong criticism by the authorities forced future partners to exercise restraint and none of the companies has yet transferred this amount. The reason is not in a financial aspect, but in possible reputation losses. Now a number of potential participants announced closing the information support program. No surprise MasterCard and Visa were ahead of the exodus. In fact, Libra project may be considered as an indirect competitor to their core business.
In order to reduce regulators’ pressure, project managers announced their readiness to restrain Libra cryptocurrency circulation in several countries. However, this decision have also caused ambiguous reaction. If the new token will be unavailable to users from the EU, USA, Canada, Australia and China, it will unlikely to be in significant demand.
Bakkt platform for institutional investors launched on September 23 was unable to reach a significant trading volume. For a week, only $ 5 million contracts were concluded here with a physical delivery of bitcoin. Moreover, daily cryptocurrency futures almost weren’t in demand. During this time, only five contracts were sold for a total of about $ 41,500.
In case of bitcoin futures launch by Chicago Mercantile Exchange, trading volume was 75 times greater than that of Bakkt. However, CME trading did not provide for the physical delivery of cryptocurrency. Therefore, it was expected that investors would show increased interest in deliverable bitcoin futures.
Bakkt platform is designed for work with institutional investors, but the contract size is only 1 BTC here. CME non-deliverable futures use 5 BTC contracts, but they do not impose restrictions on the qualification and size of the investor’s capital.
Throughout 2019, the market was awaiting the launch of a specialized trading platform for institutional investors. It was expected that hedge funds and asset management companies will spur demand for cryptocurrencies and lead to a significant increase in quotes. However, this did not happen. Some experts are certain that such a limited launch of Bakkt platform has become a catalyst for the fall on the stock exchanges. Over the past week, the BTC/USD pair fell from 10,019 to 8,245 showing the maximum decrease over the past year.
However, other experts feel certain that the challenge lies in Bakkt platform itself. During a week, only 628 contracts were closed here, while the daily CME turnover exceeded 4,000 contracts during the same period. Moreover, the volume of single transaction is five times higher, which gives a huge difference.
During 2019, the Chinese Stock Index (CSI) increased more than 50%, which may indicate a rise of interest in cryptocurrency. Some analysts attribute this to a statement by the country's officials on the imminent launch of the Chinese cryptocurrency. Particularly rapid growth is shown by the shares of companies directly related to this project. For example, the shares of Beijing Certification Authority being engaged in electronic identification services have risen in price by 200%.
In response to Libra White Paper publication, the Chinese authorities announced the intensification of work on creating a national cryptocurrency. In August, Mu Changchun, People’s Bank of China top manager, made a sensational statement. He said that the country has actually completed the preparatory work on the development of a digital currency, and it can be launched at any time.
Investors actively responded to this statement by starting to invest in related companies. The authorities will need services of companies in the field of electronic security, as well as developers of wallets and applications. After the Chinese national cryptocurrency introduction, the price of these companies will increase significantly.
It is noteworthy that Mario Draghi, ECB President, has once again criticized cryptocurrency. He claimed that this asset cannot replace fiat money and noted its low value. At the same time, the official admitted that he did not yet see the scope for digital coins. Although he said that the situation may change at any time.
Mario Draghi made a statement that now there are no technical difficulties with the launch of ECB cryptocurrency. However, the authorities do not see such a step to be reasonable and are not sure of the demand for a new financial instrument among the population and investors.