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MGT Capital Investments, Tera Group to Create First Publicly Traded US Bitcoin Derivatives Exchange

Op-ed - MGT Capital Investments

MGT Capital Investments announced a planned merger with Tera Group, which operates the first regulated U.S. Bitcoin derivatives exchange. The merger will create the first publicly traded U.S. Bitcoin derivatives exchange.

As observed by The Wall Street Journal, this is a reverse merger where Tera will take a controlling stake in MGT. Tera doesn’t seem too interested in MGT’s gaming operations, so the operation is primarily a way for Tera to go public. In other words, Tera is buying a public listing on the stock market for its Bitcoin operations.

Tera has played a leading role in the development of Bitcoin derivatives. In September 2014, Tera launched TeraExchange, the first regulated U.S. Bitcoin derivatives exchange, and TeraBit, a spot Bitcoin price index based on real-time data from a number of Bitcoin exchanges. The TeraBit price index is used as the settlement rate for USD/Bitcoin derivatives transactions.

Tera is active in the Bitcoin space, which is booming. Forget the highly volatile dollar exchange rate of Bitcoin, the important parameters are the number/volume of Bitcoin transactions and the venture capital investments in the emerging Bitcoin industry, both of which are skyrocketing. Consumers spend bitcoin online, and investors bet on the innovative potential of Bitcoin and its underlying blockchain technology. Technology expert Peter Diamandis said Bitcoin is going from deceptive to disruptive, and listed Bitcoin among his top tech picks for 2015.

That should be interesting for investors, but currently only a few publicly traded companies and funds – including Overstock, Bitcoin Shop and the forthcoming Winklevoss Bitcoin Trust ETF – are active in the Bitcoin space. With this announcement, the new Tera-controlled MGT joins the select Bitcoin club.

Derivatives such as Tera’s forwards are the simplest way to expose investors to Bitcoin, especially those investors who prefer not to trade the digital currency itself – and are the easiest way to profit from the ups and downs of the bitcoin-dollar exchange rate.

In related news, former Goldman Sachs Executive Director Timo Schlaefer announced the launch of Crypto Facilities, a U.K. Bitcoin derivatives broker. This confirms the growing interest of institutional investors in the Bitcoin economy.

“The proposed merger with Tera gives immediate and future value to our stockholders, while creating a robust platform for the growth of the industry’s first publicly listed bitcoin derivatives exchange,” said H. Robert Holmes, Chairman of MGT’s board of directors. “The Bitcoin industry attracted over $400 million of investment capital from some of the world’s most prominent investors over the past 12 months; we see our move today as further progress in the broader adoption of the industry.”

“Growing consumer and merchant adoption of bitcoin is driving demand for regulated capital markets solutions,” said Christian D. Martin, chairman, CEO and co-founder of Tera Group.

“By combining with MGT, Tera will create a unique public offering to support the essential infrastructure needed for a vibrant global bitcoin ecosystem,” Martin said.

In an interview with CoinDesk, Martin added:

“Bitcoin consumes the majority of our mindshare here in our firm. It’s our bitcoin listing and subsequent certification that has the most commercial possibilities for us right now, and it’s a business we’re very keen to cultivate and nurture along.”

MGT and Tera plan to finalize and execute a definitive agreement by March 16, 2015.

Images via Tera and MGT.