One of the things I've predicted in the past and wrote a couple of articles on is that there will be lots of prediction markets in future.
I've talked specifically about Bitcoin hashrate Perps, as those are essentially one thing one might say isn't quite open to significant manipulation, so that makes it suitable to bet on.
Of course, perpetual contracts are not traditional prediction markets, but they are exactly that, underneath everything.
Just as traditional futures and options trading is essentially a means to place a bet on a future event. They all just have different implementation designs at the end of the day.
Pendle is a project I believe I've written about once. I'll refrain from linking back because this isn't meant to be a promotion. The primary product however is that users can trade future yield. How this works, essentially, is that there are yield tokens associated with yield-bearing assets and users who expect yield to rise over time can buy these tokens, enabling the owners of the principal assets earning this yield to instantly access the yield associated with their token stake.
That's a lot of "yield" said, I know!
In a way, buyers are betting on yield to rise, also, sort of with a prediction mechanism.
It is no surprise that the project behind this, would launch futures on Bitcoin and Ether funding rates.
There's a saying I read once: never bet against the funding rates, funny how it's going to be hard to defend this now that funding rates are effectively products to bet against.
Pendle Lets Crypto Traders Bet on Bitcoin, Ether Funding Rates With Boros Platform
Pendle has opened up Boros, a new platform on Arbitrum that allows users to directly trade the funding rates of bitcoin (BTC) and ether (ETH) perpetual markets.
Boros lets users go long or short on funding rate exposure using “Yield Units” (YUs), which are structurally similar to Pendle’s existing Yield Tokens. Each YU represents the realized funding yield on 1 unit of notional, such as 1 ETH or 1 BTC, until expiry, offering a mechanism to speculate or hedge against changing funding conditions on Binance and other major derivatives venues.
The platform launched with capped parameters of $10 million open interest per market and 1.2x leverage.
For traders who pay or earn funding fees on CEXs, Boros offers a new hedge: short YU if funding is expected to fall; long if rates are projected to spike. – Coindesk
Evidently, this is an experiment but it is one that can become a lasting product.
The reason that is a possibility is rather simple. The cryptocurrency ecosystem is due for new financial products, especially now that Wall Street is getting involved. We can expect an explosion in product developments and every release becomes a potential means for alternative products or services to improve their offerings.
As the report highlighted, the ability to bet on the direction of future funding rates for these assets provides a means for hedging. Projects and individuals can embrace this as a means to offset any potential losses they may incur in active positions.
Think about it, if a trader is paying -0.1% on his short position and expects the rates to flip positive, he can leverage long the rates on Boros to recover the fees his active position is paying and also potentially earn an extra .2x based on the current max leverage.
Other traders or projects can use this in combination with multiple strategies to offer sustainable yield products across DeFi. In the case of a success, there's lots of potential here to be explored.
We are very much likely to see more of these product launches which incredibly expands the investment solutions or offerings of blockchain platforms.