Two massive stock brokerages look set to merge, as sources reveal Charles Schwab will buy TD Ameritrade for $26 billion. The deal may have an impact on the Bitcoin market, given that the latter firm currently offers BTC futures.
Citing unnamed sources, FOX Business reporter Maria Bartiromo called the merger “a done deal.” A formal announcement is expected at some point today.
The Logical Conclusion
The share price of both companies rocketed pre-market today. CNBC reports TD Ameritrade shares rising by 27 percent and Schwab’s by 14 percent.
According to Schwab founder, Charles Schwab, mergers are a “logical conclusion” given heightened competition amongst brokerages to reduce their trading fees. In October, Schwab eliminated commission fees, prompting both Fidelity and TD Ameritrade to follow.
The elimination of fees looks set to impact Schwab’s profitability in the short term. A projection made at the time estimated that the move would cut around three or four percent into profits, amounting to around $90 million per quarter.
Charles Schwab, the largest investment services firm in the U.S with over $3.85 trillion of assets, doesn’t currently offer exposure to bitcoin.
They’re expected to announce a purchase TD Ameritrade today.
TD Ameritrade offers bitcoin futures. 👀
— Rhythm (@Rhythmtrader) November 21, 2019
However, new clients are signing up fast. October saw 142,000 new registrations to Charles Schwab. This has brought the firm’s total client assets to an all-time high of $3.85 trillion.
Although the new merger may well provide more exposure to Bitcoin futures products, the jury is still out as to their impact on the market. Although having large names like TD Ameritrade, Fidelity, and the Intercontinental Exchange offering any Bitcoin product is undoubtedly positive in terms of Bitcoin awareness, most futures products are cash-settled, meaning the trader never needs to take receipt of actual Bitcoin. They function as a way to bet on price movement without actually taking on exposure to the underlying asset.
Speculating on Bitcoin’s Future
Reddit and YouTube are full of speculation as to the impact of Bitcoin futures. Many argue that the products can be used to suppress the price of Bitcoin. In September, researchers cited by Forbes observed a consistent price dip occurring in the period before CME Group futures settled. Arcane Research’s Bendik Norheim Schei commented on the findings:
“Statistically, it is highly unlikely that the price falls in advance of CME settlement should be caused by mere coincidence…. These futures contracts are optimal for manipulation… it is never actual bitcoin that change hands, and it is just an overlying market traded in dollars.”
BeInCrypto recently reported on skepticism over Bakkt’s intentions in the Bitcoin market with its own futures products. The report cites the CME Group’s Leo Melamed, who stated, “we’ll tame Bitcoin” at the December launch of its cash-settled futures products. The Bakkt-sceptic YouTuber alleges that Bakkt’s physical settlement is a sham and the platform will function as another way to exert downward pressure on the Bitcoin price. If Bitcoin futures price suppression theories are true, a potential new influx of new “paper Bitcoin” traders may not be as bullish as many will no doubt paint it to be.
Images are courtesy of Shutterstock, Twitter.
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