Question #379 ·
How does CFTC approval of spot Bitcoin trading affect market liquidity and confidence?
- CFTC approval restricts Bitcoin transactions, causing liquidity to shrink and confidence drop
- CFTC approval legitimizes spot trading, enhancing market liquidity and boosting investor confidence Right answer
- This approval has no effect, since CFTC regulations don’t apply to cryptocurrency
Why is this the correct answer?
This is correct because when the Commodity Futures Trading Commission approves spot Bitcoin trading, it gives official regulatory oversight to these markets. That oversight reduces counterparty risk and legal uncertainty, encouraging more investors to trade. Higher participation increases order book depth and liquidity, while the regulatory stamp of approval boosts confidence among both retail and institutional players.