Elwood Technologies touts strong focus on crypto derivatives

Elwood Technologies touts strong focus on crypto derivatives

Elwood CEO James Stickland, now backed by major banks Goldman, Barclays and Commerzbank, predicts "a lot of derivatives action."

Cryptocurrency trading firm Elwood Technologies says its focus will be on institutional-grade crypto derivatives following this week's $70 million funding round involving three blue-chip banks.

Large banks like those that participated in Elwood's Series A funding - Goldman Sachs, Barclays and Commerzbank's CommerzVentures - will have to keep cryptocurrencies at arm's length for now, meaning they won't hold the underlying asset itself but will gain exposure through futures and options contracts.

"The focus is on derivatives," Elwood CEO James Stickland said in an interview. "It's a great way for Tier 1 banks to get exposure in a synthetic way without having to hold the underlying asset. In fact, there are tremendous margins and spreads to be had in the derivatives space, and the traders coming from these institutional houses are very familiar with the asset class, so they can use similar strategies."

Of the banks backing Elwood, Goldman is the most advanced, having been among the first on Wall Street to begin trading bitcoin futures. Commerzbank was the first major German bank to adopt cryptocurrencies. It announced that earlier this year it had applied to the German Federal Financial Supervisory Authority (BaFin) for a license to hold cryptocurrencies in custody.

"In the area of digital assets, Commerzbank wants to help shape the emerging digital ecosystems, especially with regard to custody and trading of non-physical assets," a spokesperson for the bank told CoinDesk via email. "We are pursuing our own digital asset strategy and are also planning our own offerings for our customers in the coming years. The future offering will initially target institutional clients. "

Barclays fan clubBarclays does

not yet

follow

Goldman and Citi in offering crypto derivatives trading, but has a long history of working with permissioned blockchain technology to handle tokenized financial instruments. Barclays has also provided banking services to Coinbase for a period of time in 2019.

Barclays said it could not comment specifically on digital assets, but a spokesperson told CoinDesk via email that the bank was pleased to participate in the round and supported building regulatory-compliant infrastructure for this new asset class.

Stickland of Elwood said he was a "big fan of Barclays," and not just because of its UK connection.

"The markets team has been very thoughtful about how it can get involved in digital assets," Stickland said. "Having a stake in infrastructure is the best way to build the foundations of this asset class. As we evolve the technology and the whole asset class in general, it will be critical that we bring in players like Barclays."

Elwood's focus on institutional and synthetic crypto products is perhaps at odds with many other crypto trading firms, particularly in countries like Switzerland, where the natural evolution is toward non-fungible tokens (NFTs) and decentralized finance (DeFi).

Fear and uncertaintyGiven

the

current climate in crypto markets, a flight to safety in things like derivatives will attract institutional players, Stickland said

.

"I think there's going to be a huge amount of derivatives action where there are certainly still makers and takers that are obviously driving a huge amount of flow," he said. "As the derivatives markets start to bubble up, they will drive the buying and selling of the underlying assets.

Looking ahead,

rumors of a crypto winter are probably premature, Stickland added

: "The reality is that if you've bought in the last 12 months, you could be underwater. But there's also the opportunity to add value, buy and double down on the dip, and continue to drive the market up. The reality is that people are still invested in this asset class.