Luxor To Release Derivatives For Bitcoin Mining To Hedge Risk

Luxor, a crypto software and services firm, is releasing a new product that enables investors and businesses to lock in earnings by employing Bitcoin mining derivatives. https://twitter.com/LuxorTechTeam/status/1579488939702124544 According to a release, the Luxor Hashprice non-deliverable forward (NDF) product will be the first of its type and traded over the counter (OTC). The financial instrument would be based on hashprice, a word introduced by Luxor that describes the number of Bitcoin miners in the Bitcoin mining industry made from a unit of hashrate, or computing power, over a given length of time.

Derivatives Instrument To Use In TradFi

Participants exposed to the sector need new strategies for risk mitigation, given how badly the bear market is affecting the Bitcoin mining business. Derivative instruments have historically been employed in traditional finance (TradFi) to hedge against market declines. According to the announcement, hashprice-based derivatives, like the Luxor Hashprice NDF contract, would inaugurate a new generation of financial instruments for Bitcoin miners and provide them with much-needed tools to protect their mining operations. According to the release, it would assist investment companies like hedge funds and prop traders in getting exposure to the mining sector.

Luxor To Offer Traders To Pay With BTC

Luxor offers purchasers and sellers of the derivatives the option of paying for their transactions in Bitcoin or U.S. currency equivalents. However, the contracts for the commodities would settle in U.S. dollars. The matching and settlement of orders facilitated by Luxor and the contract periods would be adaptable to meet client demands. Luxor would settle transactions using its Bitcoin hashprice index as the benchmark for hashrate value. A locked-in price, the daily hashrate sold, and the contract duration would determine contract terms. According to the co-founder and CEO of Luxor, Nick Hansen, Hashprice derivatives are the culmination of the concept of hashrate as an asset class.