Tuesday , June 22 2021

3 things every crypto-currency trader should know about derivatives exchanges

In the last two years, futures contracts have become very popular with crypto currency traders and this became clearer then Total open interest rate on derivatives has more than doubled in three months,

Another proof of his popularity was that futures turnover surpassed gold, which is a well-established market with a daily volume of $ 107 billion.

However, Each exchange has its own order book, index calculation, leverage limits, and cross- and isolated margin rules., These differences may seem superficial at first, but they can make a big difference, depending on the needs of the traders.

Open interest

Aggregate open interest in future (blue) and daily volume (black). Source: Bybt

As shown in the graph above, total open interest on futures went from $ 19 billion to $ 41 billion current in three months. In the meantime, daily trading volume exceeded $ 120 billion, up from $ 107 billion for gold,

Although Binance futures have the largest share of this market, several competitors have relevant open volumes and interests, such as FTX, Bybit and OKEx. Some differences between exchanges are clear, because FTX loads perpetual contracts (reverse swaps) instead of the usual 8-hour window.

Open interest of BTC and ETH futures, in USD. Source: Bybt

It should be noted how CME ranks third in Bitcoin (BTC) futures, despite only offering monthly contracts, CME’s traditional derivatives markets are also notable for requiring a 60% margin guarantee, although brokers can provide leverage for specific clients.

Stablecoin vs. Margined Token Contracts

As far as crypto exchanges are concerned, most can allow a leverage up to 100 times. Tether (USDT) orders are commonly referred to in terms of BTC, In the meantime, the reverse eternal order books (marginalized by tokens) are displayed in contracts, which may be worth $ 1 or $ 100, depending on the exchange.

Implementation of orders for eternal future of USDT in BTC. Fountain. Source: Bybit

The image above shows that Entering USDT futures orders on Bybit requires an amount stated in BTC and the same procedure takes place on Binance, On the other hand, OKEx and FTX offer users a simpler option that allows the customer to enter an amount of USDT, while automatically converting to BTC terms,

Implementation of orders for eternal future of USDT in BTC. Source: OKEx

In addition to USDT-based contracts, OKEx offers a USDK pair, In the same way, Binance Eternal Future also offers a Binance USD (BUSD) book, That’s why, for those who do not want Tether as collateral, other options are available,

Variable financing rates

Some exchanges allow clients to use very high leverage And while this does not pose a general risk, as there are settlement engines and insurance funds for these situations, will push the funding rate. Therefore, lungs are often punished on those exchanges.,

8 hour financing rate for ETH futures. Fountain. Source: Bybt

The graph above shows that Bybit and Binance typically show the highest funding figure, while OKEx consistently has the lowest, Traders need to understand that there are no rules that dictate it, and the rate may vary between assets or slightly on demand.

By myself a difference of 0.05% corresponds to 1% additional cost per week, which means that it is essential to compare the financing rate from time to time, especially for bubble markets, as the rate increases rapidly.

The views and opinions expressed herein are those of the author only and do not necessarily reflect the views of Cointelegraph.com. All investments and operations involve risk, so you need to do your own research when making a decision.

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