The Future of Bitcoin Trading
The days of Mt. Gox are long behind us, and with the slaying of the giant, there was plenty of room for competitors to fill the void and spread the wealth. The scope is brought home when you see the Global Price Index by BraveNewCoin is being comprised from 60 of the world’s most liquid Bitcoin exchanges.
It did not take long for the experienced financial talent to capitalize on the trading frenzy and in 2014 the race was on to build the perfect leverage trading platform since the most volatile asset in the world was clearly not enough for the Bitcoin believers.
While more traditional exchanges like Bitfinex and BTCe added some leverage in the 3x area along with the ability to enter short positions, startups like BTC.sx took it all the way to 10 times leverage even though they were still subject to the traditional forces of executing direct trades on other exchanges.
Futures & Socialized Loss
This brought us to the next phase of trading where the concept of Futures was first implemented within the Bitcoin space. The movement started with the Chinese exchange 796 offering positions with up to 20 times leverage. Like a traditional future, it was just as easy to go long or short with all the volume being handled without actually hitting the Blockchain.
However, the problem that had to be resolved first was Counterparty Risk and the idea of ‘Profitable Accounts Socialized Loss’ was born. This idea has now been adopted across other Futures Exchanges like OKCoin and BitVC is definitely an interesting solution to the problem.
This post was published at Coin Telegraph on 2014-11-20.