Cryptocurrency exchange OKEx today (December 3rd) officially announced the launch of a new Perpetual Swap product at its NextGen Conference in Seoul.
The new product will allow traders to speculate on the price movements of bitcoin and other cryptoassets with up to 100x leverage, and features “low transaction fees” and “fast” daily settlement of swaps.
What is a Perpetual Swap?
Perpetual swaps, first launched by Bitmex, are a kind of derivative very similar to futures contracts, where speculators, miners or others who want to bet on the future price of cryptoassets can do so, but without an expiry date and with daily settlement.
In essence, they are a kind of rolling futures contract – so there is no set date at which a buyer has to buy the underlying asset – e.g. bitcoin – and at which the seller has to sell.
Since settlement occurs every day, “funding” is used to settle between long and short position holders: if the funding rate is positive, longs will pay the shorts, and vice versa if the rate is negative.
I spoke with Thomas Tse, Head Quantitative Strategist at OKEx, at the event, to learn more about how they work and why traders should care about the new offering:
Q: How does it work, why should traders be interested?
I think it’s a great product because traders want high leverage. It never settles or expires, you do not need to ‘rollover’ your contract – you do not need to open a new position. So you can hold onto a position as long as you want – either bullish or bearish, and every day the market will price in a funding cost – a bit of interest you pay.
Q: So if you agree with John McAfee and you think bitcoin is going to go to a million dollars eventually, this makes a lot more sense?
Yes, because it doesn’t expire every few months, and traders don’t have to enter a new position every new month with the new transaction fees. There’s just the funding fee – and you might actually be paid the funding fee because if you’re on the lower demand side you’re being paid the funding fee.
Panel Discussion: “Crypto Is Here to Stay”
The event also featured a panel discussion from several industry figures discussing OKEx’s new financial products, what drew them to crypto and the ongoing bear market.
With respect to the new offerings from OKEx, Julien Guerrand, the CEO of Kernel Technologies and a former trader, remarked that:
[With] All these products you can find a way to make money, a combination of futures and coins…It’s great to see swaps, will be good to some options there as well.
While Geurrand explained with respect to the ongoing crypto bear market that he doesn’t “really care about the [price] directions,” fellow panelist Ryu Dang, co-founder of Korean Crypto media company Bitgosu, was a little more reflective on the future of the market:
A bear market is a bear market – minimize your damage, diversify your portfolio…there are a lot of other assets to invest in, you have to be realistic – cryptocurrency is still in its infancy…be patient.
