“More and more users will choose the market for sustainable contracts in the future.” On the afternoon of November 14, Bybit CTO Owen Zhuang made the guest node ChainNode AMA, and he gave such an answer when answering user questions.
For more than a year, each exchange seems to be starting to explore the market for sustainable contracts. This AMA will let us focus on this hot and sustainable contract.
The exchange's heart is good: the perpetual contract last October, only two of the top ten transactions in the transaction volume opened the encrypted digital currency derivatives transaction, and only the BitMEX family opened a perpetual contract. After October last year, various exchanges have opened a perpetual contract – a dull market requires an active exchange, an active exchange requires users, and users need a perpetual contract.
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Exchanges that currently offer perpetual contracts include BitMEX, OKEx, Bybit, etc., where –
- BitMEX has strong liquidity: as long as the price of the pending order is suitable;
- OKEx high convenience: you can buy more and sell shorts by entering the corresponding quantity, and there is a mobile version of the app;
- Bybit focuses on security: dual price mechanism and one-click stop-loss function (mobile app is currently in beta);
Wait, every exchange is playing its part and playing its part for a better contract market.
And what will be the future development trend of the exchange when it pays attention to and supervision at the national level? Owen Zhuang believes that:
With the attention of the national level, supervision and compliance will be the only way. If a regulatory agency provides a license for digital currency derivatives, Bybit is also very willing to apply actively. The maturity of an industry is reflected in the soundness of each link. It is believed that the digital money industry will have more and more perfect development and supervision systems, just like the traditional financial industry. We look forward to the arrival of this day and we strongly support the relevant policies of the country.
Perpetual contract ace: Non-delivery, spot price perpetual contract was first created by BitMEX and developed on the basis of delivery contracts, but there are some differences compared to this:
(1) The perpetual contract has no expiration or settlement date, and the user may hold it until the contract is opened;
Because there is no delivery date limit, the perpetual contract can avoid the repeated opening steps caused by the delivery, avoid delays, and avoid the economic loss (handling fee) caused by repeated opening.
(2) The perpetual contract is similar to a margin spot market, and its trading price is closer to the spot;
Compared with the delivery contract, it is easy to make a sudden change in the price before the delivery period, and the risk of the “pin” of the perpetual contract is greatly reduced, but this does not mean that the perpetual contract will not burst out – when the mark price reaches Forced liquidation will still be triggered when the price is strong. The user's margin cannot meet the margin maintenance margin, which triggers a forced liquidation and the loss is used to maintain the margin for this position.
(3) The range of leverage is large, up to 100 times;
Compared to the highest 20 times leverage of the delivery contract, the maximum 100 times of sustainability is naturally more attractive to the user, but the leveraged transaction is not only an angel that can amplify the income, but also a demon of the whale's assets. Owen Zhuang said that the risks of contract transactions can basically be attributed to three categories:
1. Due to the impact of the economic cycle, the digital pass market has great uncertainty. 2. Trading on the open market, digital certificates usually have high price fluctuations and there is no ups and downs restrictions like the Chinese stock market. Price shocks often occur in the short term. Such price volatility may be caused by market forces (including speculative trading), regulatory policy changes, technological innovations, and other objective factors. 3. The user is weak in risk awareness and excessive use of leverage.
For traders, the only thing that can be done in the face of changing market conditions is to strengthen the awareness of risk control. Do not use leverage excessively. Learn to take the initiative to reduce leverage and learn to take light positions to maximize the use of funds. It is gambling.
Delivery contract or perpetual contract?
The perpetual contract is developed on the basis of the delivery contract. Does it mean that all aspects must be superior to the delivery contract? Will the delivery contract be eliminated from now on? Let's look at the characteristics of both:
The leverage of the delivery contract is small, up to 20 times, and the price is easily manipulated, significantly deviating from the spot price. Retail investors carry out delivery contracts, which is the norm, but it is still very easy to be pinned out before the delivery period. In essence, delivery is extremely unfriendly to retail investors (even if it is a hedge, it will continue to face the problem of shifting positions), and the delivery contract can be said to be prepared for the spot dealer to a certain extent.
The range of leverage for perpetual contracts is larger and can range from 1-100 times. As for price manipulation, the perpetual contract has a "position rate" design: if the bulls want to make a malicious short position and there are too many people to do more, then the rate needs to be paid to the bears. The ''Position Rate' mechanism maintains the long-short balance of the market and avoids price manipulation and malicious outbursts in delivery contracts. Therefore, even with 100 times leverage, users don't have to be nervous at all times.
However, from another perspective, although the exchange claims that it does not charge the position rate, but is charged by one party in the long and short, there may be unfairness caused by the excessive charge on the other side (the position rate is multiplied by the margin). The percentage of the price is charged, for example, ten times leverage, the fund rate is three thousandths, which is equivalent to three percent of the margin loss). Although the price of the contract will not be higher than the spot price for a long time, but it will often fluctuate above and below the spot price, it will not only benefit one party. However, if you do not plan to hold a long-term position, you will only be short-term and may deliver. The contract is more suitable than sustainability.
As a result, the uses and advantages of the perpetual contract and the delivery contract are different. The former is more risky but more speculative. Delivery contracts are more suitable for miners or some users of hedging, and if you want long-term speculation, a sustainable contract is more suitable.
In fact, whether it is a perpetual contract or a delivery contract, the current digital currency derivatives trading market is still immature. In the words of Owen Zhuang, it is still in the stage of “savage growth”. There is still a long way to go in the future, the improvement of policies, the regulation of the market, the efforts of every team… opportunities and challenges.
For details, please review this issue of AMA: