CoinFLEX plans to debut physically-settled Bitcoin futures to the Asian market beginning in February 2019. The platform is a consortium with participants such as Roger Ver (Bitcoin.com CEO), B2C2, Trading Technologies, and Alameda Research among others.
Bitcoin Futures Trading on CoinFLEX
According to Bloomberg, CoinFLEX plans to offer futures contracts for Bitcoin, Bitcoin Cash, and Ethereum. Like Bakkt (owned by Intercontinental Exchange), CoinFLEX’s offerings are physically-backed contracts.
According to CoinFLEX CEO, Mark Lamb, settling futures contracts in the underlying cryptocurrency asset improves trust. Speaking to Bloomberg on the prospects of cryptocurrency futures trading, Lamb 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.
For Lamb, there is great potential for expansion within the cryptocurrency futures market. According to the CoinFLEX CEO, the crypto futures arena should be able to grow to 20 times the size of the spot trading market as is the case for other asset classes. Presently, both markets handle approximately the same volume of daily transactions.
One unique detail of the CoinFLEX offering is that contracts will trade against Tether (USDT), the most popular stablecoin, which is pegged against the U.S. dollar. Apart from Tether, CoinFLEX also plans to launch a contract that will trade opposite Circle’s USD Coin; another stablecoin.
At the expiration of the contracts, traders who hold long positions will receive Bitcoin, Ethereum, or Bitcoin Cash while traders who hold short positions will receive USDT depending on the performance of the contract.
Offshore Incorporation to Avoid Stricter Regulations
Despite offering physically delivered Bitcoin futures, CoinFLEX will not come into direct competition with a platform like Bakkt. The reason for this is because it is incorporated offshore, allowing the platform to offer its product to a more global market except for highly regulated markets like the U.S. and the U.K.
When pressed about competition from the likes of Bakkt, CME, and CBOE, Lamb highlighted the fact that U.S.-based crypto Bitcoin futures trading accounts for only a tiny portion of the market. Most of the global BTC futures trading takes place in the offshore and Asian theater.
The primary reason for this disparity stems from the fact that markets like the U.S. remain highly regulated. Thus U.S.-based futures exchanges cannot compete with the reach of their counterparts based offshore or in Asia. The CoinFLEX chief believes BTC futures trading doesn’t require the same level of stringent regulations like the spot trading market.
With a focus on the Asian market, the platform will also be eyeing a move to compete with BitMEX, which has a sizeable presence in the region. Where the latter offers leverage of up to 100 times on specific contracts, CoinFLEX caps its offering at a leverage of 20 times.