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The second-largest cryptocurrency exchange, OKEx has created a Bitcoin derivative product called “perpetual swap”. However, there’s no expiry date. The lack of expiry data allows positions to be held on an ongoing basis.
The product was announced on Tuesday, and with it, traders now have the ability to speculate on the value applied between OKEx’s BTC to the USD Index, giving a $100 nominal value for each of the swap contracts. Traders have the option to either long or short or position, giving them profit from the increase or decrease in price, respectively.
To explain, perpetual Swap is a peer-to-peer, virtual derivative that enables users to speculate the direction of the price of digital assets. Its mechanism is reportedly very similar to a futures contract, but with no expiry and daily settlement. Each swap contract has a notional value of $100 Bitcoin (BTC) equivalent.
Per the release, the new derivative product allows users to perform perpetual swaps, futures contract, and spot trade with margin and leverage simultaneously.
Contract trading allows users to purchase and sell digital currencies at predetermined prices at specified times in the future, giving investors and traders an opportunity to open both long and short positions.
The new product offers up to 100 times leverage, compared to the 10 times commonly available in traditional capital markets, which OKEx said can reduce the trading cost. Settlement time is at 04:00 and 16:00 UTC daily, while the traded price of a perpetual swap contract is “closely anchored to the spot market price,” said the exchange.
Other benefits include lower transaction fees, daily-settlements of closed positions, fast-withdrawals of realized profits, and a “tiered margin” system to allow traders to change their leverage levels as per market movements and risk appetite.
Lennix Lai, Financial Market Director of OKEx, said:
“The launch of perpetual swap demonstrated our continuous commitment to building a complete financial ecosystem on blockchain and crypto. With the new offering, investors and traders can select the products which best fit their trading and hedging strategies.”
He also warned traders to avoid over-leveraging their positions and understand the inherently risky nature of the cryptocurrency market. He recommends practicing robust risk control strategies which are “equally crucial in trading.”
Just for reminder, in October, OKEx delisted over 50 trading pairs with weak liquidity and trading volume. Later in November, the exchange announced it was delisting the second swathe of trading pairs due to “weak liquidity” in order to “create a robust trading environment and offer the best trading experience” for traders.
We already wrote of how this Hong Kong-based cryptocurrency exchange in October announced adding support to trade four new stablecoins pegged to the U.S. Dollar. The exchange made this announcement in an official support notice rolled out today. Furthermore, the exchange noted that it will start rolling out the new additions from Monday and Tuesday.
In late November, leading digital currency exchange Huobi launched the Huobi Derivative Market (Huobi DM), allowing its customers engage in cryptocurrency contract trading on both rising and falling cryptocurrency prices.
There’s also a “tiered maintenance margin ratio” feature on these perpetual swaps, which means that traders can use their open positions for leverage adjustments, based on the market conditions and risk appetite. Then, a “mark price” mechanism is applied to protect from volatile issues in the market by stopping unbeneficial liquidations.
Other cryptocurrencies will be added to the exchange in the future, though the firm has yet to confirm how long that will take or which cryptocurrencies may be in the running to be added.
OKEX is a futures trading exchange recently launched by Chinese bitcoin giant OKCoin. In addition to operating bitcoin exchanges, OKCoin offers a mobile consumer payment and lending app. They also maintain strong liquidity in the CNY/BTC pair. OKCoin maintains two main entities, including one focused on China’s domestic market and another focused on the international market (based in Hong Kong).