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The Bitcoin derivatives market is heating up as cryptocurrency exchange CoinFLEX is now launching its physically-delivered Bitcoin futures.
The product will be launched for Asian investors starting next month.
CoinFLEX will be competing against Intercontinental Exchange and Eris Exchange who are also getting ready to roll Bitcoin futures soon.
First Exchange to Launch the Derivative?
While Intercontinental Exchange via Bakkt and Eris Exchange LLC are expected to start offering these contracts shortly, CoinFLEX states that they were first to market.
CoinFLEX will provide derivatives on some of the biggest digital coins to investors in Asia from next month onwards.
CoinFLEX began as CoinfloorEX, a unit of UK based Bitcoin exchange Coinfloor.
It is now rebranding itself as ‘Coin Futures and Lending Exchange’ or CoinFLEX.
CoinFLEX is owned by a consortium, including Trading Technologies International Inc., Dragonfly Capital Partners, Alameda Research and Roger Ver.
Coinfloor will also retain some equity stake in the new exchange as its co-founder Mark Lamb takes over as the CEO of the new business in Hong Kong.
Talking about the exchange, he said:
“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.”
What Is Coinflex Offering?
The exchange will offer futures contracts in three of the top 5 largest cryptos in the market- Bitcoin, Ethereum and Bitcoin Cash, with up to 20x leverage available.
The exchange will be in direct competition with BitMEX, another exchange with a big presence in Hong Kong. BitMEX currently offers a 100x leverage to its users for some futures contracts, five times as much as CoinFLEX’s offerings.
The most important factor working for CoinFLEX is that its futures will be physically delivered. This means that owners will receive the underlying crypto when the contract expires.
Some big players currently offer cash payments when settling crypto contracts which many say can be manipulated.
By settling contracts in cryptocurrencies only, this removes the risk of manipulation and could increase the overall trading volume of the cryptocurrency market.
Mark Lamb noted that the daily trading volume of the cryptocurrency spot market is currently equal to crypto derivatives, as opposed to other financial markets where derivatives volumes can be 20 times higher.
He said that this shows the potential of cryptocurrency futures.
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