The digital assets financial services company is the latest crypto exchange to fold up during tough market conditions.
Eqonex is shifting its focus to its asset management and cryptocurrency custody business lines. The company said on Monday that it will ‘proactively exit the crowded crypto exchange space’ by closing the exchange to streamline its operations and focus resources primarily on the businesses that offer the most potential for revenue growth and long-term financial sustainability.
‘Closing the exchange will reduce operating costs and allow the company to grow where it has larger competitive strengths,’ CEO Jonathan Farnell said in a statement.
In addition to focusing on its asset management and custody businesses, Eqonex is laying the foundations to launch a structured products unit ‘in the near future’ to offer professional investors and institutions exposure to bespoke crypto investments.
Eqonex hired Nick Cogswell (pictured) as head of sales for its asset management business in July and Franklin Heng as head of asset management in Asia.
Cogswell previously worked on equity structured product sales at Jefferies and has held senior roles at Santander and Lehman Brothers. Heng joins Eqonex after spending 11 years at Springboard Capital and also formerly worked as head of equity derivatives and structured products distribution for The Royal Bank of Scotland.
They will join Eqonex’s head of investment solutions, Frank Copplestone (right), another former Jefferies and Morgan Stanley structured products executive.
Eqonex’s asset management business comprises investment products, structured products, a fund of crypto hedge funds and a lending division. The company launched a bitcoin exchange-traded note on the Deutsche Börse Xetra Exchange last month.
Digivault, the group’s digital asset custody business, is registered with the United Kingdom’s Financial Conduct Authority and recently became the first custody partner of stablecoin poundtoken.io.
The company’s headquarters will move from Hong Kong to the UK due to its asset management and custody operations being primarily based in the British islands.
The Nasdaq-listed company’s exchange is slated to close trading Aug. 22 and halt withdrawals on Sept. 14.
HANetf expands white label crypto ETC and ETP capabilities
HANetf ‘white label’ Ucits ETF issuer plans to extend its white label product platform capabilities to cryptocurrency ETCs.
The new platform will offer asset managers the ability to launch all manner of crypto ETCs from physically backed, synthetic, leveraged, options strategies and index products. The company wants to create an industrial scale platform for crypto ETPs and will also offer other ETPs in asset classes such as bonds, equities, commodities, and currencies in the ETC wrapper.
To date, the firm has focused on Ucits ETFs and physically backed gold and carbon ETCs. The current platform has around 20 clients and over 40 ETFs and ETPs.
The new ETP platform will allow clients to choose between a “full service” model, or a more basic model which may be of interest to managers with existing distribution networks or particular target markets in mind.
HANetf currently distributes the single coin crypto ETC range on behalf of ETC Group which are among the most liquid available in Europe.
‘It is clear to us that many, despite the recent sell-off, view cryptocurrencies as playing a vital role in our digital future,’ said Nik Bienkowski (above-right), co-CEO and co-Founder of HANetf. ‘We believe crypto is an asset class which will continue to develop, grow, and become more mainstream over time.
Bear market puts crypto options in the spotlight
Traders are increasingly the crypto options market to bet on ethereum and hedge their positions in the run up to the decentralised blockchain’s much-anticipated merger. Panama-based derivatives platform Deribit, one of the world’s largest cryptocurrency options trading platforms, has reported that demand for options trading surged ahead of the ethereum merger.
Coinbase second-quarter earnings noted that one of the reasons behind the decline in trading volumes - which has resulted in a 30% drop in the company's revenue, is the traders’ shift to derivatives-focused platforms.
‘A larger amount of trading volume took place at offshore exchanges in Q2,’ stated Coinbase in its earnings report. ‘The sequential decline in Q2 institutional trading volume was primarily driven by lower market maker volume on our trading platform. These market participants gravitate towards products such as derivatives and financing products, which are areas we’re continuing to invest in but we don’t currently have product parity with offshore exchanges.’
Bitcoin options trading accounts for only 2% of open publicly traded derivatives contracts across cryptocurrency exchanges trading bitcoin, whose market cap is about US$462 billion, according to structure product provider Enhanced Digital Group (EDG).
By contrast, at CBOE, traditional stock options trading accounts for 20% of the S&P 500's total market capitalization, EDG said.
‘When you think of all the other [S&P 500]-like products including [exchange-traded funds], SP Minis, etc., you can see that bitcoin options have multifold growth ahead of it,’ said Marcin Maksymiuk (above-right), a quantitative developer at EDG.
First Libor-like for DeFi and interest rate derivatives goes live on Ethereum
IPOR Labs, a company developing blockchain-based derivatives software, has announced the launch of its Inter-Protocol Overblock Rate (IPOR) Protocol.
The IPOR Protocol consists of two parts: the IPOR index and the IPOR Interest Rate Derivatives Decentralized Exchange (DEX).
The index is a Libor-like benchmark interest rate sourced directly from DeFi smart contracts based on transparent, auditable, and real-time smart contract interactions. The index is published on-chain as a public good via a bespoke oracle where protocol builders and contracts can reference the IPOR Index rates as the base for new credit markets, lending agreements, derivatives, and other structured products.
The IPOR Interest Rate Derivatives Decentralized Exchange (DEX) - the first derivative instrument based on the IPOR Index - is a 28 day cancellable swap which uses a peer-to-pool model between a trader and the liquidity pool as underwriter for both pay-fixed and receive-fixed contracts.
‘In turbulent market conditions amid increasing interest rates, risk management comes to the forefront for investors, particularly in the credit markets,’ said IPOR Labs CEO Darren Camas (above-right). ‘Where CeFi becomes the villain, DeFi has taken a hero role, particularly in the credit markets where major platforms have functioned flawlessly during the market downturn. The new index offers ‘a fully transparent and auditable benchmark rate and interest rate derivatives to manage risk.’
Julius Baer eyes DeFi coins
Swiss private bank Julius Baer believes the outlook for digital assets is positive, especially for cryptocurrencies that provide a platform for decentralized finance (DeFi) protocols.
The bank said in a recent podcast that is particularly positive on DeFi tokens, noting that although there are risks involved, they could also result in ‘very appealing long-term returns’.
‘In our view, these platforms and protocols are set to become a new generation of productive assets, comparable to equities,’ said Esteban Polidura (right), Julius Baer’s Americas head of advisory and products.
‘We are witnessing an increasing number of retail and institutional investors who are considering digital assets as part of a portfolio.’
The private bank believes there are many areas in DeFi that could be integrated into existing financial services rather than completely replacing them, especially as more firms realize the benefits of technology.
But adoption will not be uniform across markets, especially in ones that lack the conditions needed for regulatory support. In addition, the bank believes it may still be too early for investors to add any meaningful crypto allocations because beyond the ‘high volatility and correlations between tokens, the market has also demonstrated limited safe haven characteristics’.
‘From a portfolio perspective, digital assets provide some diversification benefits, but not to the extent that many may believe. They often suffer more strongly than equities in times of risk aversion,’ said Polidura.
Julius Baer's model portfolio currently has around five percent allocated to alternatives with no investments in digital assets.