BlockFi to double staff on crypto futures surge

US crypto spot and derivatives platform BlockFi expects to double the number of staff devoted to institutional clients this year after seeing a surge in interest which is largely driven by demand for access to bitcoin and ethereum futures.

In an interview with Global Investor, David Olsson, vice president, Europe and Asia and global head of institutional distribution said BlockFi is seeing rapid growth in demand from institutional clients and large hedge funds for regulated crypto derivatives as well as arbitrage opportunities between spot and futures contracts.

New Jersey-based BlockFi, a liquidity provider of CME Group’s bitcoin and ether futures, last month cleared the first-ever ether futures block trade on CME. The trade, in partnership with CMT Digital, was facilitated by ED&F Man Capital Markets.

“We have hundreds of millions in the pipeline in terms of clients that have reached out to us, new clients mostly in the traditional multi-billion dollar hedge fund space, looking to trade these contracts,” Olsson said. “We’ll be hiring more salespeople to reach out to the corporate and institutional client base and develop that market.

“People that were on the periphery are now jumping into the pond and building infrastructure to be able to trade these contracts. You haven’t seen a sovereign wealth fund or a pension fund invest in crypto yet, but we’re betting that’s going to happen in 2021, and we want it to be with BlockFi.”

CME launched cash-settled ether futures on February 8, almost exactly three years after the US group launched bitcoin futures, which were followed by bitcoin options around two years later. From launch to the end of February, trading volumes in the US group’s ether futures reached $1 billion, according to cryptocurrency data provider CryptoCompare.

Olsson estimated that a year ago around 80% of BockFi’s clients were prop trading firms, but that has now shifted to an even split between market makers and hedge funds.

To accommodate the shift, BlockFi has increased the number of sales staff devoted to institutional clients from three to 20 since last May, a number set to double over the next year. Traders, business development and support staff for those clients has increased from 10 to 50 in the same period, a number that is expected to reach 100 by this time next year.

“We’re recreating what you would see in an investment bank in markets, so we have to have people that understand institutional clients,” Olsson said.

While CME’s crypto contracts overcome regulatory and operational barriers, demand is also being driven by improved infrastructure and the prospect of diminishing supply as ether moves from 1.0 to 2.0, a new blockchain regime that will change the way the cryptocurrency is processed when the system launches in 2023.

In addition, PayPal’s agreement to acquire Israel-based digital asset security firm Curv, one of three institutional-grade crypto networks, has added credibility to the infrastructure, Olsson said.

“In 2017, if you wanted to move crypto securely from one exchange to another, there was not a secure network to do that and you had to take a risk. Since then, networks like Curv have developed secure links between every exchange and every custodian, so along with availability on regulated exchanges, the secure infrastructure is leading to improved confidence for the larger investors.”

Panelists at a February webinar hosted by CryptoCompare agreed that the recent unprecedented increase in crypto demand, met with a 24 hours a day, seven days a week trading model, has the potential to change trading patterns and technology across the entire exchange landscape.