Last week, after receiving approval from US regulatory authorities, Coinbase allowed retail investors to trade “regulated leveraged cryptocurrency futures” through Coinbase Financial Markets (CFM).
This move by Coinbase aims to bring the largest compliant cryptocurrency exchange in the US to the general public, offering cryptocurrency futures trading, including Bitcoin contracts.
Looking back, the cryptocurrency market has shown signs of recovery in October. In terms of cryptocurrency futures, in October, open interest in Bitcoin futures rose by 27.1%, while open interest in Ethereum futures increased by 6.1%. In terms of futures trading volume, Bitcoin futures trading volume in October increased by 59.5%, reaching $768 billion.
With the Federal Reserve slowing down its interest rate hikes and the possibility of entering a rate-cutting cycle in the future, the potential investment opportunities in the derivatives market in the next year are significant. Additionally, if international geopolitical conflicts continue to escalate, the value of derivatives markets as risk-hedging tools is expected to increase. Users who utilize tools such as options for arbitrage investments are poised to lead the market.
In 2011, the first batch of cryptocurrency derivatives was listed, initially limited to futures contracts based on Bitcoin prices. Over the years, exchanges began offering a wider range of derivative products that investors can use to hedge against market volatility and profit from future price fluctuations. By 2020, the cryptocurrency derivatives trading market had explosively grown to historic highs.
As of May 2020, the 24-hour trading volume in the cryptocurrency spot market was $200 billion, while the trading volume in the cryptocurrency derivatives market was approximately $320 billion, about 60% higher than the spot market. With more institutional investors seeking to hedge large-cap cryptocurrencies like Bitcoin, many experts believe that the trading volume of cryptocurrency derivatives relative to spot trading may further expand.
Indeed, according to CoinGecko data, as of March 2023, cryptocurrency derivatives dominate the entire cryptocurrency market, accounting for 74.8% of the total cryptocurrency trading volume of $2.95 trillion. Meanwhile, the market share of centralized cryptocurrency exchanges (CEX) and decentralized exchanges (DEX) spot trading is only 22.8% and 2.4%, respectively. Compared to the past six months, the dominance of cryptocurrency derivatives reached its peak in March this year.
In August this year, Coinbase announced that the global cryptocurrency derivatives market accounts for about 75% of the global cryptocurrency trading volume, making it a crucial entry point for traders.
Before discussing derivative financial products, finding key derivative trading channels is the primary entry point for traders. The cryptocurrency derivatives trading platform Flipster has reimagined users’ futures trading experience with a mobile-first approach. In essence, Flipster targets cryptocurrency retail traders with derivative trading experience, allowing them to reduce technical difficulties posed by applications and focus on derivative trading.
Founded in 2021, Flipster has now become an all-in-one platform, offering over 120 assets for trading with leverage of up to 100x and regularly adding new perpetual contracts. To become the most competitive platform for traders, Flipster differs from other exchanges by providing tokens for futures trading that other exchanges typically do not offer.
In the perpetual contract trading on Flipster, a margin mechanism is introduced, directly affecting traders’ risk tolerance and trading strategies. In simple terms, if a trader purchases a 0.1 BTCUSDT perpetual contract at a market price of $30,000 and chooses to use 10x leverage in a long position, the initial margin will be set at 10% of the nominal value, while the maintenance margin will be 0.5% of the nominal value. This means that the nominal value of the position is $3,000, and the initial margin is $300.
If the price of the perpetual contract rises from $30,000 to $36,000, the initial margin remains unchanged at $300. The unrealized profit will bring the trader a profit of $600, and the remaining margin will reach $900. This highlights the key role of Flipster’s margin mechanism in leveraging trades and maximizing traders’ profits.
The founders of Presto Labs, who are the backers of Flipster, established the project in 2014 with no external investment. With their strategy, they have elevated Presto Labs into a top global cryptocurrency trading company over the course of over 8 years. The Presto Labs team currently consists of around 200 members, with a weekly order volume of approximately 100 million orders, a monthly average trading volume of $30-40 billion, and an annual trading volume exceeding $700 billion.
In the current market downturn, many large exchanges have begun to transform, with funds temporarily shifting from cryptocurrencies to AI. The cryptocurrency market is seeking innovative growth strategies beyond speculation.
CEO Yongjin Kim of Flipster stated:
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