NEW PRODUCT ALLOWS TRADERS TO BENEFIT FROM MARKET VOLATILITY
BitMex-type futures contracts, commonly known as open-ended swaps, are gaining popularity among cryptocurrency firms. Binance and OKEx introduced open-ended swaps last year, and now is the time for Huobi to join the trend.
Huobi DM already provides derivative cryptocurrencies, including bitcoin futures, which expire on a weekly, bi-weekly, and quarterly basis.
The platform now offers continuous swaps. These derivatives provide merchants with virtually no access to Bitcoin. The product is similar to a futures contract that mimics the spot price of a cryptocurrency but has no expiration or maturity. Typically, platforms exchange payments between buyer and seller every 8 hours.
According to Huobi DM, open swaps are "a new derivative product that allows consumers to better hedge and resolve arbitrage in an unstable market."
Ciara Sun, Huobi Group’s VP of Global Business unit, explained:
As we’ve recently experienced, sudden market swings can have a significant yet temporary impact on the broader financial ecosystem, but volatility itself is a very normal part of market cycle. Perpetual swaps provide traders another tool in their arsenal to capitalize on market movements to create arbitrage.
HUOBI’S PERPETUAL SWAPS SUPPORT X125 LEVERAGE
It is likely that Huobi monitored how other exchanges behaved and applied best practices from their own point of view. In particular, the derivative platform allows a maximum leverage of up to 125, as is the case with Binance. This suggests that the trader’s initial deposit for the position can be increased by 125 times to maximize potential profit. However, the risk of loss is also much higher, so most experts warn that such tools should be allowed only to institutional and professional investors.
In other places, the maximum leverage for BitMex and OKEx is 100x. When Binance first announced its maximum leverage, it received a lot of criticism.
However, Huobi claims to offer several key risk management features to mitigate risk, including a partial liquidation mechanism and a liquidation circuit breaker. The first gradually reduces the user's position, and does not completely exclude him in one event. The liquidation switch is used in abnormal market conditions when the platform determines large deviations between liquidation and market prices.
Perpetual swaps have been on our roadmap for quite some time, but we wanted to ensure we had the right risk controls in place before we made it available to users, Sun explained.
Recently, was reported that Huobi would compensate traders who lost fund because of the system failure during the crypto market crash.