In an impressive vote of confidence, NASDAQ, the world’s second-largest stock exchange after the New York Stock Exchange, has begun development on a new global exchange for Bitcoin and other digital currencies.
Nasdaq OMX Group Inc., which owns NASDAQ, has agreed to provide New York-based Bitcoin startup Noble Markets with the core technology to power the new digital marketplace. The focus of this endeavor is to allow companies and institutional investors such as hedge funds to trade bitcoin and related digital-currency assets. Nasdaq’s innovative X-stream trading system will be used by Noble to match orders of the participants. X-Stream is already used by more than 30 exchanges and marketplaces worldwide.
“There is a lot of demand” for digital currency trading from institutions, said Noble Chief Executive John Betts, noting that his early conversations with investors involved a lot of “What is bitcoin?” questions, whereas now he hears, “Bitcoin is interesting, but where can we trade?’” He added, “A lot of them just couldn’t do business with the existing exchanges. But we are a team of investment veterans. We speak their language.”
Mt. Gox was the original Bitcoin exchange, providing price certainty to a brand new market that needed a guide. Their fatal flaw was poor management and lax security which pooled funds from investors, and added them into common accounts. Each account didn’t get it’s own wallet for safekeeping. Investor funds were pooled together, making them far easier for hackers to steal, or insiders to embezzle (we still don’t know which.) Noble Markets’ management system will protect invested funds in transparent, segregated accounts protected by third-party institutions.
Wall Street has become more and more bullish on Bitcoin over the past year. This started with Bloomberg LP agreeing to post Bitcoin prices on their ticker last Spring, making it easy for Wall Street to follow the market. Since then, many recent developments and personnel changes have come to pass, like chess pieces being strategically positioned on a board, most occurring in 2015.
With the amount of bad press the Bitcoin exchange industry has received since Mt. Gox to the present day, Betts believes this is a huge step forward for Bitcoin and its perception as a sound investment. Now, a company or hedge fund can enter the market with complete confidence after NASDAQ’s stamp of approval. And their investments could bring much-needed stability to the volatile Bitcoin price.
“They can say, ‘These are sophisticated organizations; they have done their due diligence, and if it’s good enough for them, it’s good enough for us.”
In the joint statement released to the Wall Street Journal by NASDAQ and Noble Markets, Lars Ottersgård, Nasdaq’s executive vice president for market technology, said they are looking forward to this project, and are not short-term players.
“We are thrilled to work with the experienced industry veterans at Noble Markets and look forward to supporting their cutting-edge, new endeavor for the long term in addressing the needs of the digital currency space.”
The ramifications of this announcement are huge. This is obviously a huge vote of confidence in Bitcoin and digital currencies, in general. This takes a huge amount of thunder out of the Winklevoss’ Gemini exchange project, even though their upcoming exchange may focus on the consumer market and not the institutional buyer. And the timing of the announcement is particularly impressive, as a rash of exchange closures and thefts have left the Bitcoin community stunned and confused. Adding probably the world’s strongest brand in financial exchange to Bitcoin’s Rolodex should have long-term brand and economic effects on Bitcoin’s value and perception.
This will also serve as quite a kick in the pants to the current digital currency exchange industry. They had better tighten their game because a great white shark is heading into the Bitcoin pool. I advise them to work together to come up with a strategy where they work together to create a way to sell their exchanges as safe, secure, and accountable. Just because NASDAQ isn’t after the broader consumer market initially doesn’t mean they aren’t coming. NASDAQ just put the current digital currency exchange players on the clock.
If Winklevoss’ Gemini program hits the consumer market like NASDAQ/Noble hit the institutional buyer, pickings can get awfully slim for the current exchange establishment. Stuck between the Chinese markets and the giants forming in the U.S., the game is changing faster than the Bitcoin price.
Right now, people new to the Bitcoin market don’t know if the exchanges are here today, gone tomorrow. NASDAQ brings instant credibility and stability to the digital currency exchange market, and removes massive amounts “exchange risk” in the process, at least to the biggest fish in the sea.
The Bitcoin marketplace of late has needed a new infusion of strength and credibility, especially in the currency exchange industry. Something people new to Bitcoin can trust. Bitcoin needed its ship to come in. And here it is the Queen Mary.
Images provided by Noble Markets and Shutterstock.
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