In the astonishing run-up to bitcoin’s price recently, much commentary has focused on the role of media and online chatter about the digital currency in propelling bitcoin’s price to new highs. Not enough attention, however, is paid to the ecosystem of services that has emerged as a result of an increase in bitcoin’s price. 

In fact, the halo effect of bitcoin’s price has resulted in the crafting of a slew of services and tools, which has helped attract mainstream investors. In turn, this will further increase trading volumes and liquidity for the cryptocurrency and draw a diverse set of investors into the cryptocurrency’s fold.

From Limited Appeal to Mainstream Traction

Back when it was introduced to the world in 2009, bitcoin was a mysterious entity with limited appeal to traders and investors. The absence of exchanges and platforms to buy or sell the cryptocurrency further stymied adoption and trading for the cryptocurrency. Things did not improve much in the following years, when bitcoin exchanges made news for the wrong reasons. (See also: Where's The Missing Mt. Gox Bitcoin, Now Worth Almost $2 Billion?)

There were only three bitcoin exchanges in the world as recently as 2013. Trading volumes on those platforms peaked at $635,762 in April 2013. Compare that to the 124 bitcoin exchanges across the world today. These exchanges have recorded trading volumes of as much as $10.5 billion in recent days, according to data from Coinmarketcap.com.

Nolan Bauerle, director of research at CoinDesk, says bitcoin is the widest deployment by individuals of public key cryptography in history. “People will use these keys to express consent and form and secure all manner of digital relationships,” he says. (See also: TradeStation To Offer Bitcoin Futures On Its Platform.)  

For now, those relationships are mostly restricted to trading. The diversity of tools within bitcoin’s ecosystems helps investors perform a variety of actions, from tracking rewards for each mined block to shorting bitcoin to helping hedge funds store bitcoin with custodians like Coinbase. (See also: 5 Ways To Short Bitcoins.)

Established institutions like the CME and CBOE are also getting into the act, and they are expected to provide an additional fillip to the ecosystem. (See also: CME To Launch Bitcoin Futures.) 

“I expect significant demand for bitcoin futures on both sides of the market [between investors who prefer cash-settled futures (offered by CME and CBOE) and those who prefer bitcoin-settled futures (offered by other exchanges)] that will increase cryptoasset liquidity overall,” says Can Kisagun, co-founder of Enigma, a decentralized hedge fund trading system. Catalyst, the company's first product, enables users to develop algorithmic trading strategies for bitcoin exchanges. According to Kisagun, primary interest for the platform has mainly come from amateur investors and semi-professional investors.

Other platforms offer similar propositions but for different customers. For example, Leverj is a decentralized exchange for bitcoin derivatives. The platform provides users with a public key for derivatives transactions to ensure anonymity.

“A high-speed non-custodial platform has been the killer app that crypto world has been waiting for,” claims Bharath Rao, a Wall Street veteran and co-founder of the platform. According to Rao, the bitcoin financial services ecosystem will expand to include physically delivered options, complex custodial services, trusts, and annuities over the next decade as the cryptocurrency becomes mainstream.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.