Can Bitcoin derivatives support Bitcoin for the next decade?

特邀专栏作者

2020-01-03 16:48 (UTC+8)

This article is about 3653 words, reading the full article takes about 6 minutes

The past five years can actually be regarded as a testing period for Bitcoin derivatives. This period should start when BitMEX withdrew from the derivatives market in 2014.

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The past five years can actually be regarded as a testing period for Bitcoin derivatives. This period should start when BitMEX withdrew from the derivatives market in 2014.

The past five years can actually be regarded as a testing period for Bitcoin derivatives. This period should start when BitMEX withdrew from the derivatives market in 2014. Now, as cryptoeconomics prepares to enter a whole new decade, crypto derivatives products will also play an even more pivotal role in price discovery. For the Bitcoin and futures markets, which have billions of dollars in profits and losses at every turn, the importance of 2020 is self-evident, because this year may determine whether the entire market can start the next bull market.

2020, the year when Bitcoin derivatives are about to achieve a breakthrough

In 2019, cryptocurrency futures trading volume approached spot trading volume. In 2020, the trading volume of cryptocurrency futures is expected to exceed the spot trading volume, and even continue to rise. When we see the success of cryptocurrency derivatives platforms such as Binance Futures and BitMEX, as well as new products such as FTX, dydx, and Synthetix, many people will think that 2020 will be the "year of derivatives" in the cryptocurrency industry. Not only that, but regulators seem to have sent positive signals, such as the Commodity and Futures Trading Commission (CFTC), an independent regulator that oversees the U.S. futures and options markets, recently hinted that they may approve an ethereum exchange in 2020. A new cryptocurrency derivative product supported by Fang.

If the user experience of the relevant product is excellent, it will be easy to attract new market participants or new capital into the cryptocurrency derivatives market. However, if there are a lot of new derivative products in the next year, can they play a role in affecting the price trend of Bitcoin? And if so, who would benefit most from it?

A series of cryptocurrency derivatives will be developed

In 2020, we expect to see many cryptocurrency derivatives appearing on the market, such as:

1. Singapore exchange Bybit plans to enter the markets of Thailand, Turkey, Vietnam and Spain;

2. The latest USDT margin perpetual swap transaction service launched by OKEx may be favored by people. With the increasing popularity of decentralized finance, decentralized derivative products are expected to be more widely used;

3. Synthetix, the second largest DeFi application in the Ethereum ecosystem, has just announced a partnership with Chainlink, which means that their derivatives trading mechanism no longer needs to rely on centralized price feeds.

Today, there are many cryptocurrency derivatives that traders can choose from, and the Bitcoin futures trading platform can also meet people's demand for high leverage of various digital assets. In addition to Bitcoin and Ethereum, traders can even go long or short altcoins such as Cardano, Enjin, Tomo, and Stellar if they are daring enough.

Fiat-to-crypto gateways such as Plutus’ virtual bank accounts and debit cards have also been optimized to make derivatives exchanges more attractive to retail investors who no longer need to lock their crypto assets in Tether ( USDT). As the conversion between cryptocurrencies and fiat currencies becomes easier, it means that traders can directly spend their profits or reinvest them without going through multiple loops (very cumbersome steps) as in the past. ). Services like Plutus, which allow users to convert between fiat and cryptocurrencies within a single app, bring great convenience to traders looking to gain exposure to a wider range of cryptocurrency transactions. Often overlooked in assessing the health of the derivatives market is the availability of easy links to fiat currencies, but such services are critical to driving capital inflows into the derivatives market.

U.S. bitcoin futures market heats up

Institutional investors seem to be increasingly interested in bitcoin futures, and the U.S. hasn’t actually lost innovation in this regard. On the contrary, a lot of innovation is happening in the US, and they are trying to determine the development of the crypto derivatives market. One platform seeking to play a significant role is Bakkt, which launched physically-settled bitcoin futures in the United States in late 2019, as well as cash-settled options products based on bitcoin futures. ) approved the first regulated bitcoin futures contract. At this stage, Bakkt's physical settlement of bitcoin futures contract trading is provided through Singapore's ICE Futures Singapore exchange. Total open interest on Bakkt bitcoin futures hit an all-time high of $6.5 million in December last year. Still, it will be interesting to see how Bakkt adjusts over the next 12 months as the company's CEO, Kelly Loeffler, ascends to the U.S. Senate.

For every cryptocurrency trader, there is a great desire to recover from the price decline of the 2018 downturn and to make profits again. Bakkt is not the only platform that has made a huge contribution to market development. In 2019, Binance’s bitcoin derivatives have exceeded the spot circulation. They also acquired the cryptocurrency derivatives platform FTX (but the specific first amount was not disclosed to the public. ). Prior to this, Binance also launched JEX, the first cryptocurrency spot and derivatives exchange, which also allowed them to add crypto options and futures products to their platform.

Tim McCourt, general manager of the Chicago Mercantile Exchange (CME Group), recently wrote about bitcoin derivatives. In fact, CME Group has listed and operated bitcoin futures derivatives for two years. Tim McCourt believes that Bitcoin derivatives are still in the "forward curve" of development. So far, CME Group has traded 2.4 million Bitcoin futures contracts, with a notional transaction value of about 12.5 million BTC (worth more than $92 billion). Some have speculated that the main reason why Bakkt and CME Group have shown increased interest in Bitcoin futures contracts compared to previous years is actually the lower volatility of Bitcoin. In any case, these platforms are using their respective advantages to provide more choices for Bitcoin derivatives traders.

Regulation is curbing the risk of leveraged derivatives

In essence, leveraged cryptocurrency derivatives can give investors twice the result with half the effort. However, as Warren Buffet said, derivatives are, to some extent, more of a financial instrument of mass destruction that requires careful risk management.

On the other hand, regulators have been working globally to curb the risks of leveraged derivatives, such as:

1. In May 2019, Japan’s Financial Services Agency required bitFlyer to reduce the leverage ratio of its perpetual swap products;

2. The UK Financial Conduct Authority is also taking tougher action to ban cryptocurrency exchanges from offering derivatives to retail investors. In addition, the agency requires retail brokers to inform clients of the risks associated with investing in derivatives across all asset classes.

Competition in the crypto derivatives market is increasingly incentivized

As more and more cryptocurrency-derived products and services appear in the market, the battlefield for share has also begun to rage. Blade, a San Francisco-based cryptocurrency derivatives exchange, also has backing from Silicon Valley venture capitalists. Recently, Blade announced that it will launch a "zero-fee" cryptocurrency derivatives trading service, which is definitely a "blatant provocation" to the perpetual swap service giant BitMEX. Additionally, Bitdex has also suggested a potential avenue to support a non-custodial perpetual swap bitcoin futures contract product (although more work is needed to develop the concept).

So, what does the booming Bitcoin derivatives market mean for the price of Bitcoin?

Coinshares Chief Strategy Officer Meltem Demirors believes that the growth of the cryptocurrency derivatives market means that the price of Bitcoin has become less important-that is, after the halving, the price of Bitcoin will be controlled. Meltem Demirors said that the evolution of Bitcoin into an investable asset has effectively decoupled its price from value, and supply and demand. As the crypto derivatives market receives more and more attention, more investors will choose to hedge spot positions through derivatives, and then effectively manage price risks and reduce the impact of fluctuations.

Because derivatives trades are done on margin, these trades require careful engineering of a spot price index derived from trading prices on other, larger physical exchanges. The spot price index is primarily used to settle futures contracts after they expire, and to decide when to send margin calls to investors—obviously, for cryptocurrency derivatives contracts that are not so liquid, this is to prevent A smart approach to market manipulation.

Summarize

To sum up, compared with other commodity markets, the Bitcoin derivatives market does not seem to be in a healthy and reliable state. This is actually because derivatives are usually used in traditional financial markets, and ordinary investors are familiar with such products. So may be attracted to the cryptocurrency space. In fact, many institutional traders have been reluctant to use cryptocurrencies so far due to the lack of tools for hedging transactions and managing risks. However, with the development of the derivatives market, cryptocurrency trading hedging and risk management will be effectively improved.

Today's market

BTC: From last night to this morning, Bitcoin has another trend similar to that of the word market. After it hit in the early morning, it pulled up instantly. I think it is a little bit below 7000. Last night's market was a bit of a fixed-point liquidation, and it knocked down a lot of the bottom. Now there is a node around 7320 above the market, and we cannot blindly chase higher. You can try to enter the market with empty orders above 7300, and you have to catch more orders when you come down.

The investment road is very lonely, especially when there is no direction. When we (VX:pzzz393) are watching the market, we will discuss and discuss together, and many directions will come out. How lonely it is to walk alone, and you will always meet such people People, let's gather together to deeply cultivate the users of the C-end currency circle, hold the money in the pocket, and earn the money in the market!