From the early education to open up the market, to the contending of a hundred schools of thought, and now the head effect is obvious, the contract market is a must for exchanges. Especially this year, the U-standard perpetual contract and the cross-margin model are the most concerned directions by contract players. They mark the relative maturity and completeness of the exchange contract product matrix, which also lays the foundation for the recent outbreak of the contract market The foundation.
Author|Tao Hu
01
Contract market rises, USDT standard perpetual contract breaks out
Bitcoin prices have performed exceptionally well in recent months. The biggest beneficiaries are not only overseas institutions that have continued to increase their positions before, but also major exchanges, and a large number of users and funds have poured in. In this process, the trading volume of cryptocurrency contracts from exchanges such as Huobi and Binance also set new highs continuously, bringing more increments and variables to the contract market.
Huobi and Binance contract trading volume trends in 2020 From: Non-small
Behind these data, it reflects that the value of the contract market is receiving more recognition from the outside world. In view of the anti-cycle characteristics of contract products and the role of hedging, the contract market has gradually become an indispensable core business of the trading platform after several years of market education. Especially in the first half of this year, exchanges have entered a fierce competition in the contract market, from UI interface, product functions, to the main focus on compliance and security, and to various preferential policies.
TokenInsight pointed out two phenomena in its 2020 Q3 Digital Asset Derivative Exchange Industry Report: First, the trading categories of the top exchanges are becoming more complete, basically covering the U-standard and currency-based contracts of mainstream assets. The differentiation of competition is gradually decreasing; second, for the hotter Token category in the market (especially DeFi projects), futures contract transactions will be launched in a relatively short period of time, and the categories and asset categories are becoming more complete.
At the same time, the data also shows that in the third quarter of 2020, the proportion of perpetual contract transactions in the entire market rose to 80%. The figure was 39.1% in the first quarter of 2020 and 75.2% in the second quarter. This change indicates that the focus of digital asset derivatives traders continues to shift from delivery contracts to perpetual contracts.
From a more specific product level, the U-standard perpetual contract and the cross-margin model are the most popular directions for contract players this year. They also mark the relative maturity and completeness of the exchange contract product matrix. The outbreak of the contract market laid the foundation.
First look at the U-standard contract. It is also called a forward contract, which refers to a contract in which users use USDT as collateral and settlement. The opposite is a reverse contract, that is, a currency-based contract. Margin and settlement of a currency requires users to bear the contract profits and losses caused by market fluctuations, as well as the double risks of the currency itself. Therefore, in comparison, U-standard contracts are more popular in the market.
Take Huobi as an example. According to official data, the exchange launched the UDST standard perpetual contract on October 26. As of December 27, the 24H trading volume reached US$6.57 billion, an increase of 12504 times over the first day of launch. Currently, Huobi's U-standard perpetual contract trading volume accounts for 38% of the total contract trading volume. These data illustrate to a certain extent the importance of starting from the product direction, keeping up with user needs and solving user pain points in stimulating transaction volume growth.
In fact, Huobi Contract is the first platform to support real-time settlement. This function has covered currency-based delivery, currency-based perpetual and USDT-based perpetual contracts. Users can withdraw the profit after closing positions at any time.
Compared with the weekly settlement or daily three settlements of other platforms for delivery/perpetual contracts, the real-time settlement function can extract the profit after liquidation at any time, which is equivalent to the contract platform's own potential "shared" risk. However, it is not so easy to implement the real-time settlement function, which requires extremely high risk control capabilities of the trading platform.
It is understood that the risk control ability of Huobi Contract relies on the adoption of multiple risk restrictions, such as strict restrictions on user positions, open/close prices, and order volume. In terms of liquidation, Huobi Contract has Ladder adjustment coefficient and stepped liquidation mechanism, the liquidation engine also refers to the latest index price and EMA, which can keep user positions as much as possible when the market fluctuates, and avoid liquidation to the greatest extent. Based on this, Huobi Contract has maintained a record of "zero allocation" for all varieties since its launch, which is relatively rare in the market.
02
Deeply dig into user needs and launch the full-warehouse margin function
Driven by many exchanges, the trading volume of USDT-based perpetual contracts has greatly exceeded the momentum of currency-based perpetual contracts. Under this momentum, whether an exchange can seize users in the market, the most important thing is whether it can provide users with well-loved products and functions, and the cross-handling margin model has become an important breakthrough.
The full position margin function is also called the full position mode. In the full position mode, all USDT in the account will act as a margin to provide guarantee for the positions of each contract, that is, the positions of all contracts under the full position share an account equity. The profit and loss in the account, the occupied margin, and the rate of guaranteed assets are combined and calculated.
Since all available balances in the account are used as margin, it is relatively difficult to liquidate positions under low leverage and volatile market conditions. However, in the case of severe market volatility, there is a high probability that all funds in the account will be lost. Therefore, it can be seen that the whole position model is more suitable for institutions or experienced users to do hedging and quantitative trading.
The opposite is the warehouse-by-warehouse model, in which USDT perpetual contract contracts are separately accounted for margin, and the risks and returns of each position are independent. When the position is forced to liquidate, the final loss is only the assets under the contract of that type, which is also the user's maximum loss, and has no effect on other account by position.
Of course, in the case of large price fluctuations and high leverage settings, positions in the warehouse-by-warehouse mode are easy to be liquidated. Therefore, the warehouse-by-warehouse model is more suitable for investors in short-term trading. When the direction is wrong, the loss can be limited to a range.
In the past, most exchanges only launched a warehouse-by-warehouse model, but as the market becomes more mature, the whole-warehouse model has also become the key development direction of exchanges.
The exchange that recently launched a cross-stake margin mechanism is Huobi. It is understood that Huobi officially launched the cross-margin model for its USDT standard perpetual contract on December 11 this year. It now supports thirteen major products, and the same currency can be held at the same time as the cross-sold model and the cross-sale model. The trader's trading strategy can be more flexible.
"Our original intention is to provide traders with a wealth of choices, and at the same time to facilitate traders to better use various trading strategies." Huobi related person in charge Iris told Chaincatcher.
In order to further diversify its contract products, Huobi Contract launched the "Recharge Assets to Give VIP" campaign, and also upgraded its shared VIP plan. On the basis of the original "VIP of his firm is the VIP of our firm", the VIP of third-party exchanges Users can apply for Huobi's currency-based perpetual, currency-based delivery contract corresponding to the VIP+1 rights and interests, and the strength is also very advantageous in comparison with major contract platforms.
The operation of Huobi has also been operating frequently recently. According to a contract player, the Huobi Contract is currently doing double-dancer activities. Users who complete the activity tasks will receive a chance to win a lottery and have a chance to win a million-dollar gift.
From real-time settlement to locked-in collateralized assets, and then to the cross-storage margin model, it can be seen that the reason why Huobi can continuously launch market-recognized contract products is largely due to the attention to user needs and in-depth mining , And only in this way can it provide continuous impetus for the growth of the contract market and ensure long-term benign interaction between its own platform and users. This is the key reason why Huobi Contract can become the world's largest one-stop derivatives service platform.
However, for exchanges that compete in the contract battlefield, if you want to truly capture users and achieve long-term business, you still need to remind users to pay attention to risks at all times. At the same time, there are many aspects such as trading habits, brand trust, security, and compliance. Start together. After all, compared with the traditional financial industry's futures contract trading scale, the cryptocurrency contract trading market still has a huge room for development, and there is bound to be a long-term battle.
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