This year’s CryptoFrontiers Conference was held on November 28, 2018, in New York City. In the Conference, one of the largest digital currency exchange in market Huobi announced that it would begin to start derivatives contract trading which will be available via Huobi’s Derivative Market (Huobi DM). Huobi DM will be open to customers of select countries and will allow them to open both short and long positions for a handful of coins.
Commenting on the launch, Mr Joshua Goodbody, General Counsel of the company’s Global Institutional team remarked
Cryptocurrency is a rapidly expanding and maturing market. As part of that maturation, we see more and more sophisticated investors and traders from more established financial markets looking to gain exposure, including institutional players. At the same time, we think many experienced, successful cryptocurrency traders are looking for a broader range of investment tools than has traditionally been available. Huobi DM is tailor-made to address these sorts of needs.
Lets first try to understand a little bit more about derivative.
What is a Derivative?
As per Investopedia
A derivative is a financial security with a value that is reliant upon, or derived from, an underlying asset or group of assets. The derivative itself is a contract between two or more parties, and its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.
Derivatives can either be traded over-the-counter (OTC) or on an exchange. OTC derivatives constitute the greater proportion of derivatives and are not standardized. Meanwhile, derivatives traded on exchanges are standardized and more heavily regulated. OTC derivatives generally have greater counterparty risk than standardized derivatives.
Derivatives on Crypto — Is this the Turning Point.
From my perspective, Bitcoin derivatives are a milestone. It shows the market is matured enough for the institutional players to enter. One of the most significant positive aspects is that derivatives bring in for more liquidity and increase the general awareness of crypto assets which means more demand.Another good factor is that it puts more pressure for regulators to bring in more and reasonable regulations. Once investors feel that the there is enough protection to their funds, we will be seeing more influx of investments flowing to crypto markets.But there are some concerns as well. Derivatives do allow to short Bitcoin as well. Which means there will be high pressure to drop the prices as well which can lead to low demand and push down the price.
Huobi’s Derivative Market (Huobi DM)
Huobi DM is the digital asset derivative trading platform of Huobi Group. The main aim is to provide customers with the ability to buy or sell Bitcoin (BTC) or any other crypto assets at predetermined prices at specified times in the future.The main advantage of Huobi DM is🎫 Superior risk management: Huobi monitors the platform 24* 7 ensuring the best risk management services are offered to the clients.
🎫 Investor protection — Huobi has set up a 20,000 BTC insurance fund to protect users against, system issues and unfilled liquidation order losses. It jas also set up a circular break mechanism which helps users from unnecessarily forced liquidations.
🎫 Fee structure: Zero fees for market makers
🎫 Leverage flexibility- To ensure more profits Huobi DM offers 1X, 5X, 10X, and 20X leverage.
🎫Speed: One of the best trade engines offering 10X matching speed.
Crypto is considered to be a highly volatile and high-risk asset. With the introduction of derivatives from established players like Huobi give more confidence to the instutional player as well as accelerate adoption.Huobi DM is currently in Beta testing mode, and is limited now but will be expanding soon.More information can be found here: https://www.hbdm.com/