Hong Kong Startup To Offer Physical Bitcoin, Ethereum Futures (With Leverage!)
Per a recent piece from Bloomberg, the “contest” for physically-delivered Bitcoin futures is heating up, as another contender has entered the fray. This new contender is a Hong Kong-headquartered up-and-coming crypto startup named CoinFLEX, formerly a branch of U.K.’s Coinfloor. This fledgling venture reportedly is backed by ” (former) Bitcoin Jesus” Roger Ver and Trading Technologies International, which is a firm that programs and manages trading software.
Mark Lamb, a crypto enthusiast of six years, will be heading the exchange as chief executive. Lamb has purportedly made the decision to delve into offering leverage, as CoinFLEX is purportedly looking into offering physical futures contracts for Bitcoin, Bitcoin Cash, and Ethereum with up to twenty times leverage. These contracts will purportedly be linked to Tether (USDT), a controversial, yet necessary move, for CoinFLEX’s unique settlement system.
For the uninitiated into the world of derivatives, physical (physically-backed) means that when contracts expired, their owners will be given the asset stipulated, rather than the cash equivalent. Lamb expressed the importance of physical derivatives in a recent interview with Bloomberg:
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.
Lamb explained that in a best-case scenario, the crypto futures market can be twenty times larger than its spot compatriot, meaning that eventually, dozens of billions could be traded via crypto-tied derivatives.
Is CoinFLEX A Bakkt, BitMEX Competitor?
From the looks of it, many would argue that this little-known startup is poised to tackle the big dogs in the cryptosphere. For instance, some would argue that this platform could be a “Bakkt killer,” as CoinFLEX intends to offer physically-delivered futures with leverage, which will likely draw in ambitious speculators from across the globe.
Bakkt, for those who missed the memo, is America’s first cryptocurrency platform from a notable institution (NYSE parent, the Intercontinental Exchange) that intends to launch physically-backed BTC futures, which will set its offering apart from vehicles on the CME and CBOE. Many have argued that Bakkt will single-handily catalyze crypto’s next bull rally, but with the arrival of CoinFLEX, maybe it can be a double-handed effort.
Yet, considering that Bakkt has partnered with Microsoft, Starbucks, Boston Consulting Group, and notable groups within and outside of the cryptosphere, some would argue that the ICE initiative remains far ahead of CoinFLEX.
However, some still believe that this upstart is poised to tackle the hegemony that BitMEX, another notable crypto platform headquartered in Hong Kong, registered in Seychelles, has established for itself. Many know BitMEX and its respected, yet sometimes controversial founder, Arthur Hayes, for offering 100x leverage on their XBT/USD pair.
This feature alone has propelled the exchange, estimated to have made over $1 billion in fiscal 2018, to the top of the cryptosphere, often trading one million BTC (notional) during volatile sessions. And while the XBT/USD pair works well for zany speculators, especially those who want to turn the quickest buck in crypto, the platform uses paper BTC and a complicated margin system to facilitate leverage.
So, many believe the introduction of physically-delivered futures with high leverage could be an appealing option for those hesitant to use BitMEX. Yet, even if CoinFLEX garners a substantial amount of traction, BitMEX, which has a lofty office in Hong Kong’s most expensive piece of corporate real estate, would likely adapt to surmount its competitor.
Title Image Courtesy of Andre Francois Mckenzie Via Unsplash
