Wednesday, September 22, 2021

3 things every crypto trader should know about derivatives exchanges

Share on FacebookShare on Twitter

Related articles

Up to now two years futures contracts have develop into extensively fashionable amongst cryptocurrency merchants and this turned extra evident as the whole open curiosity on derivatives greater than doubled in three months.

Extra proof of their recognition got here as futures turnover surpassed gold, which is a well-established market with $107 billion in daily volume.

Nevertheless, every change has its personal orderbook, index calculation, leverage limits and guidelines for cross and remoted margin. These variations may appear superficial at first, however they will make an enormous distinction relying a merchants’ wants.

Open curiosity

Mixture futures open curiosity (blue) and each day quantity (black). Supply: Bybt

As proven within the above, the whole mixture futures open curiosity rose from $19 billion to the present $41 billion in three months. In the meantime, the each day traded quantity has surpassed $120 billion, larger than gold’s $107 billion.

Whereas Binance futures maintain the bigger share of this market, plenty of opponents have related volumes and open curiosity, together with FTX, Bybit, and OKEx. Some variations between exchanges are apparent, similar to FTX charging perpetual contracts (inverse swaps) each hour as a substitute of the standard 8-hour window.

BTC and ETH futures open curiosity, USD. Supply: Bybt

Take discover of how CME holds the third place in Bitcoin (BTC) futures, regardless of providing completely month-to-month contracts. The standard CME derivatives markets additionally stand out for requiring a 60% margin deposit, though brokers would possibly present leverage for particular shoppers.

Stablecoin versus token-margined contracts

As for the crypto exchanges, most will enable as much as 100x leverage. Tether (USDT) orders are often denominated in BTC phrases. In the meantime, the inverse perpetual (token margined) order books are displayed in contracts, which may be value $1 or $100 relying on the change.

BTC perpetual USDT futures order entry. Supply: Bybit

The above image exhibits that Bybit USDT futures order entry requires a BTC-denominated amount and the identical process takes place at Binance. Alternatively, OKEx and FTX supply customers a better possibility which permits the shopper to enter a USDT amount, whereas robotically changing to BTC phrases.

BTC perpetual USDT futures order entry. Supply: OKEx

Along with USDT-based contracts, OKEx affords a USDK pair. Equally, Binance perpetual futures additionally affords a Binance USD (BUSD) ebook. Due to this fact, for these unwilling to make use of Tether as collateral, there are different choices obtainable.

Variable funding charges

Some exchanges enable shoppers to make use of very excessive leverage and whereas this won’t pose an total danger as liquidation engines and insurance coverage funds are in place for these conditions, it’ll stress the funding price. Thus, longs are often penalized on these exchanges.

ETH futures 8-hour funding price. Supply: Bybt

The above chart exhibits that Bybit and Binance often show a better funding price, whereas OKEx consistently presents the bottom. Merchants want to know that there are not any guidelines implementing this, and the speed might range between belongings or momentarily leverage demand.

Even a 0.05% distinction equals 1% in extra prices per week, which means, it’s important to check the funding price each infrequently, particularly throughout bull markets when the charge tends to escalate rapidly.

The views and opinions expressed listed below are solely these of the writer and don’t essentially replicate the views of Each funding and buying and selling transfer entails danger, you must conduct your individual analysis when making a call.