Hong Kong-based Coinflex exchange has announced plans to offer futures contracts for bitcoin core (BTC), bitcoin cash (BCH), and ethereum (ETH) with leverage of up to 20x. All futures bought and sold on the exchange will be physically delivered, meaning that when the contracts expire, holders will be paid the underlying cryptocurrency instead of cash.
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‘Crypto Derivatives Could Become Bigger Than Spot Markets’
Coinflex CEO Mark Lamb speaking on Bloomberg
Coinflex, which spun off from the United Kingdom’s oldest cryptocurrency exchange, Coinfloor, will become one of a few exchanges in the world to offer cryptocurrency derivatives to retail investors. The contracts will start in February, according to a Bloomberg report published on Jan. 7.
Other exchanges such as Intercontinental Exchange Inc., which owns the New York Stock Exchange, and Chicago-based Eris Exchange, recently revealed plans to introduce physically delivered futures for BTC.
Coinflex chief executive officer Mark Lamb told Bloomberg that he was confident his company has the capacity to gain market share in the new area of digital currency derivatives. He stated:
Crypto derivatives could become an order of magnitude larger than spot markets and the main thing that’s holding back that growth is the lack of physical delivery. Volumes are reduced because of a problem of trust when it comes to cash-settled trades.
Coinflex’s contracts will trade against tether (USDT), the USD-pegged stablecoin. That means that at expiry, parties who are short will deliver bitcoin and receive tether, while the reverse is also true.
“Tether is the most liquid, highest volume stablecoin that exists right now and seeing the resolution of recent issues and attestations by banks and outside firms make us confident in using it as a stable coin,” Lamb stated.
Futures Daily Volume to Reach $60 Billion
The exchange will face competition from Bitmex, one of the world’s largest digital asset trading platforms, which also has a sizable presence in Hong Kong and was co-founded by former Citigroup trader Arthur Hayes. Bitmex offers leverage of up to 100x on some of its contracts.
Lamb asserted that futures volumes could reach close to $60 billion per day compared to the current $3 billion daily trading volume in the crypto market. The Coinflex CEO further indicated that the new exchange will be incorporated in the digital currency-friendly Seychelles, in a move that will allow it to trade across the world with less hassle. He detailed:
In order to be a large, global exchange focused on traders, the best way to serve the market is to be offshore. Since crypto is a global audience and being regulated by one country would restrict who we can deal with elsewhere, we have chosen to be offshore in order to maximize our accessibility and the trust traders place in us.
Coinflex is reportedly owned by a consortium that includes Trading Technologies International Inc., crypto trader Mike Komaransky, and Dragonfly Capital Partners. Market markers B2C2, Global Advisors, Alameda Research, Amber AI, Grapefruit Trading, Coinfloor and its subsidiary companies also make part of the consortium that owns Coinflex.
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