The cryptocurrency derivatives market is on heat, with the BitMEX release of the XRP-USD quanto swap tool. The so-called ‘quanto-swap’ represents the derivative with an interest rate taken from the difference between different currencies. During the swap, one person is paying another interest. It is derived from the difference between the foreign and local assets, or between two ‘shitcoins’ (in the Bitcoin maximalist lingo, all the coins are ‘shitcoins’, while we just try to keep the atmosphere).
After the contract expiration, the amount in the swap is settled in cash. Because the instrument and the underlying asset are different currencies/resources. The tools are useful for people who look for liquidity, and unusual ways of making a percentage-based profit.
Up and Down Contracts are Totally Drowned
The new service created by BitMEXmex will allow traders to swap between XRP and the U.S. dollar. The tool will be available on February 5, while the UP and DOWN contracts on BitMEX are eliminated as the unnecessary asset class. Per the official press release:
“We are proud to announce that a new Ripple USD (XRPUSD) quanto swap will be launched on BitMEX on Wednesday 5 February 2020, contract details will be available on Testnet on Friday 24 January 2020. More details to follow.”
“As an ongoing effort in improving our offerings and experience for users, effective Friday 31 January 2020 at 12:00 UTC, all UPs and DOWNs contracts will be delisted. Existing BitMEX UP and BitMEX DOWN contracts will be settled at that time as usual and no new contracts will be listed from that time onwards. The affected contracts are XBT7D_U105 and XBT7D_D95,” added the company.
It is no wonder that the exchange wants to get rid of the UP and DOWN contracts, as those are very old market instruments somewhat similar to binary options. You can either bid on the upwards trend of the coin or place a bet that the coin is set to annihilation by the market whales. Such contracts exist in different forms and on different platforms.
All the transactions with contracts are settled in Bitcoin for a term of 7 days. The DOWN contracts don’t have a margin call or liquidation price. Buyers were able to maintain short positions on the market. They also were able to gain profit on the price drops, before the contract time end. At the same time, UP contracts allowed to participate in increasing cryptocurrency prices.
However, a lack of trust and absolute centralization is everywhere. Binary options have presumably lost popularity an led the BitMEX traders to abandon contract-based betting.
Jeff Fawkes is a seasoned investment professional and a crypto analyst covering the blockchain space. He has a dual degree in Business Administration and Creative Writing and is passionate when it comes to how technology impacts our society.