To compete with Bakkt on physical-delivery Bitcoin (BTC) futures, CoinFLEX, a new spin-off from London- based exchange Coinfloor, registered in Seychelles, headquartered in Hong Kong, plans to offer futures and spot contracts for three of the most liquid digital assets — Bitcoin, Bitcoin Cash, and Ethereum with 20x leverage to retail investors in March.
To Bring the Trust Back on the Table
Physical delivery is how 98% of traditional futures are settled. Replacement of settlement of futures contracts with physical delivery rather than cash settlement is frequently proposed to reduce the frequency of market manipulation. In today’s crypto derivative market, volumes are largely reduced because of trust issue when it comes to cash-settled trades. During a recent interview with Singularity Financial (www.sfl.global), CoinFlex CEO Mark Lamb expressed the importance of physical crypto derivatives, stating:
“You can’t really use futures today in crypto for anything other than speculation. Speculation is great, most of the crypto ecosystem is speculation today, but there are things like lending, borrowing…in today’s crypto derivative market there is limited room for any commercial use…it is very difficult to hedge mining exposure because, when the miner short futures, they are not looking for to receive a cash settled P&L, they don’t want manipulation risks. We try to provide more trustworthy contracts and the biggest way to ensure that is through physical delivery. The promise that at the expiry, if you long, you get bitcoin in your account; if you short, you deliver bitcoin and receive Tether.”
CoinFLEX , is backed by some heavy weights like Trading Technologies, Roger Ver, Mike Komaransky, Dragonfly Capital and a number of market making firms. It is important to point out that, CoinFLEX is partnering with Trading Technologies (“TT”), a company spearheading front end screen trading to create the market’s most innovative solutions for trading futures in fixed income and now crypto markets. TT brings in $1 trillion dollars of notional derivatives volume per day; about 30% of the major traditional exchange volumes presently have a TT customer order on one side of the volume. CoinFLEX will use TT as a distribution partner in Asia and globally.
Majority of crypto today is retail traders. To bring the trust back on the table is the goal set forth by CoinFLEX, which is founded by Mark Lamb, CEO, a six-year cypto veteran and initial co-founder of Coinfloor, the first UK spot exchange in 2013; and by Sudhu Arumugam, CRO, carrying over 20 years’ experience in trading and risk management experience across fixed income, equities and crypto derivatives markets in both Europe and Asia.
CoinFLEX is Ready to Launch in March
While Bakkt is still under scrutiny by Commodities Futures Trading Commission, CoinFLEX is ready to launch in March. Mark states:
“The reason we come to Hong Kong is because the City is very crypto friendly here, but mostly we are here for the customers…Asia is where the majority of the crypto retail base is…We are registered offshore in Seychelles.
“At this stage, we want to focus on building out the forward curve through monthly, quarterly, and so on…also create spread market between the future contracts, and basis market between spots and futures…so what the spread market and basis market allow people to do is to lend out their balances…”
“We use stablecoins for the settlement of our futures…and we are big fans of Tether and other stablecoins.”
The new CoinFLEX market will be closer to both the Asian & Western crypto ecosystem with BTC/USDT & USDC/USDT pairs, potentially influencing the movements of cryptocurrencies between Global traders. Despite Bloomberg recently addressing concerns around USDT the Tether company is still raising doubts about its solvency, and the heavy reliance of the crypto trading ecosystem on it is worrying to some traders. While USDT itself is liquid in trading against digital assets, it is relatively difficult and expensive to exchange back to fiat currency. Mark responded to this claim saying that, “Most OTC desks will quote you a fairly tight price in USDT/USD or USDT against other fiat currencies. For small traders, they will usually cash in and out of USDT through a local spot exchange and big traders will usually go OTC. The promise of redemption with Tether.to keeps the market honest and keeps the deviations from being too sharp. For anyone who wants protection from those deviations, CoinFLEX offers a USDT futures contract against USDC.”
Which One to Use, Bakkt, CoinFLEX or BitMEX
Bakktis a cryptocurrency platform created and regulated by the Intercontinental Exchange (ICE), which is set to launch physically backed Bitcoin futures in 2019. What sets CoinFLEX apart from Bakkt is their offering of 3 different crypto assets and the ability to trade with 20x leverage.
Many crypto enthusiasts believe, by implanting physically delivery future contracts, it helps remove bad apples from the crypto derivative market, which could likely lead the next crypto bull run. Since CoinFLEX is about to go into operation, we can very well verify this thought.
BitMEX, also headquartered in Hong Kong, offers traders the ability to trade with 100x leverage on their XBT/USD trade pair. This high-leverage trading feature has made BitMEX an estimated $1 billion+ in 2018 alone. BitMEX offers cash settlement for its future contracts, which has raised eyebrows by the community of prop traders.
Source: Singularity Finance
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