Aaron Brown, Columnist

Cryptocurrencies Move a Step Closer to the Mainstream

The opening of the LedgerX platform creates the possibility of large-scale trading among traditional financial institutions.

October 23, 2017 at 10:00 AM UTC

By Aaron Brown

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

Normalization.
Photographer: Sean Gallup/Getty Images

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Last week may be remembered as the turning point when cryptocurrencies joined the mainstream financial system, as the clearing and trading platform LedgerX1508527235213 opened for business. About 20 institutional investors -- including investment banks, asset managers, hedge funds and proprietary-trading shops -- executed bitcoin forward and option trades at narrow spreads and without difficulty. This creates the possibility of large-scale trading among traditional financial institutions supporting both the vastly increased use of the currencies in business and their inclusion as an asset class in investment products from pension funds to hedge funds.

But before anyone gets too excited, remember that activity on LedgerX seems to have been limited to tests,1508527266578 176 trades from Oct.16 to 20 represented only $1,000,000 of notional value. Will institutions take advantage of their new capability to trade bitcoin in size either for their own accounts or to offer crytocurrency-linked products to their customers? If so, LedgerX has plans to introduce longer-dated contracts and Ethereum and possibly other cryptocurrency swaps and options.