BitCoke crypto Quanto Swap
Today, the crypto market is a vast ecosystem of more than two thousand tokens and coins. And each of them focuses on a specific project based on blockchain technology. But some developments are truly innovative products - such as cryptocurrency derivatives. This article will look at one of the most well-known Bitcoke derivatives trading platform and learn how to trade on the BitCoke cryptocurrency derivatives trading platform.
What are derivatives and crypto derivatives?
To be successful in Bitcoke derivatives trading, you need to understand the instrument clearly.
A derivative is a financial contract between two or more parties whose value is derived from the value of the underlying cryptocurrency. More specifically, it is a contract that regulates the purchase or sale of an asset in the future at a specific price.
The derivatives themselves have no value. Instead, their value lies in what price movements await the cryptocurrency in the future. There are three primary variants of such contracts - swaps, futures and options, which are discussed in more detail below.
Main types of derivatives
There are hundreds of variations of contracts on the market, but they can all be divided into three main categories.
Swaps are considered to be the most difficult market instruments to master. Such derivatives allow participants to exchange their financial flows. One party can transfer cash flow to the other party. The most common example of such an action is changing a fixed interest rate to a floating rate. Traders can also decide to swap the underlying cryptocurrency or interest rates.
Companies like to use swaps because it helps them reduce cash risk. Typically, these derivative contracts are negotiated between individuals without the use of an exchange. The intermediaries may be investment banks, which take the risk.
The principle of options differs considerably from futures. While in a futures contract, both parties of the contract are obliged to buy or sell on a certain date, the option contract has a feature, such as asymmetry. An option contract binds one party and allows the other party to make a decision later when it expires. Consequently, the favoured party who has the option pays some premium for it.
There are two types of options: call options and put options. The former gives the right (but not the obligation) to buy the cryptocurrency at a given price at a later date, while the latter gives the right to sell at a predetermined value. Options, like futures, are traded on cryptocurrency exchanges.
A futures derivative regulates the sale of an asset at future data, but at a predetermined value already. Such agreements are actively traded on cryptocurrency exchanges, with the platform acting as an intermediary. As with any contract, it is not possible to change the terms once it is made. Exchange contracts are made:
- in specifically defined volumes
- in a specifically defined form
- for certain terms of validity
It is also common practice on exchanges to have a daily reporting procedure, meaning that all gains and losses on derivatives are settled on the day they are received. In this way, credit risks are minimised. It should be noted that in dealing with futures, the seller and the buyer do not enter into a contract with each other, but with the exchange.
About BitCoke and Team
Registered in the Cayman Islands, BitCoke is a Hong Kong-based one-stop crypto trading platform featuring Quanto swap perpetual contracts. We are committed to combining trading prowess with characteristics of the crypto market to provide a transparent, professional, and user-friendly experience for our customers while meeting the diversified requirements from various investment entities such as retail customers, professional traders, investment institutions, etc.
The founding team consists of famed professionals in finance and blockchain venture capital. The CEO has served as the director of proprietary trading in a renowned investment bank and possesses extensive operation and management experience in the financial sector. The technical partners are experts in high-frequency trading systems, responsible for developing a high-frequency trading system of Merrill Lynch before joining Bitcoke. The CTO and IT team members are former staff of Google, Credit Suisse, Merrill Lynch, Morgan Stanley, and other tech companies. They are deft at the trading system, settlement, risk management. The Chief Product Manager was a derivatives trader in a famous hedge fund and led a quantitative team with high-performance records before their current positions.
Bitcoke Security Practices
Security is the first thing every trader and crypto-enthusiast thinks about. That's right. If security is assured, the job is 50% done, and there is no need to worry anymore.
BitCoke employs multi-signature addresses for deposits and withdrawals, with 95% of assets stored in offline wallets.
Even if the whole system is compromised by hackers, e.g. web servers, trading engines, and databases, hackers do not have complete secret keys to withdraw crypto assets.
Furthermore, every outbound withdrawal from BitCoke was manually scrutinized and audited by at least two BitCoke employees before a transaction.
Third-party servers verify all deposit addresses generated by BitCoke to ensure they keep secret keys controlled by BitCoke founders. If the public keys do not match, the system will shut down immediately, suspending all transactions.
BitCoke adopts the first-class security parameter package in AWS, AlibabaCloud.
All BitCoke systems require multiple authentications for access, including hardware authentication. In addition, separate systems cannot interact with each other except through approved and supervised channels.
Trading Engine Security.
BitCoke's trading engine, programmed in Java language, is a unique and proprietorial toolset that Banks often apply in high-frequency trading applications. In addition, BitCoke's trading system has unprecedented speed and reliability.
The speed advantage not only allows us to execute more transactions and trades per second, but BitCoke can also audit the whole system's accounts on a daily frequency. At any time, trading PnL of all accounts in the system must amount to zero. Otherwise, trading will be suspended.
Quanto Swap Guide
BitCoke is the first Quanto swap exchange in Crypto Space. So let's have a quick overview and learn what it is.
Quanto Swap contracts are essentially an inverse perpetual swap. From the perspective of trading, though, it is akin to future contracts in traditional finance with some subtle differences:
- It has no expiry or settlement date.
- Quanto swap enables perpetual hold of a contract by resembling a margined spot market, where most times, its price fluctuates in tandem with the underlying asset.
- Through Funding, Quanto Swap contracts can closely follow the spot Index price.
- In contrast to futures contracts, in which contango can be significant due to market fluctuation.
- Quanto Swap accepts 3 Settlement Coin assets (BTC, ETH, USDT) as margin to leverage trade all perpetual contracts available on BitCoke and settle PnL.
Reasons for using derivatives
So why have so many traders started using crypto derivatives?
Derivatives provide several benefits to today's financial markets, which is why they are becoming more and more popular every day. Namely:
- Determining the price of the underlying cryptocurrency. For example, the value of futures can reflect the most accurate price of a commodity.
- Risk hedging. An investor can buy a derivative whose value moves in the opposite direction from the value of the cryptocurrency the investor is holding. Consequently, profits from the derivative can offset losses on the underlying asset.
- Providing access to inaccessible markets or assets. Through contracts, entities can gain access to trading venues or currencies that are not directly available to them for one reason or another.
- Making markets more efficient. It is widely recognised that trading in cryptocurrency derivatives helps improve the efficiency of financial markets. Contracts offer the possibility of asset repayment. Therefore, equilibrium in the underlying asset's value and its associated derivatives is ensured.
- Protection against volatility. The main reason for the existence of derivatives is that legal entities and individuals want to reduce the level of risk for themselves and build protection against solid price fluctuations.
- Speculation. Cryptocurrency derivatives are very much in demand among traders because they profit from price changes.
These contracts also have some disadvantages, which were largely responsible for the financial crisis in 2007 and 2008, even before the cryptocurrencies appeared. These are the high volatility of the derivatives themselves. In addition, they are difficult to value, so the risks remain. Also, because of the exposure to speculative features, there is a risk of losses in case of unwarranted use.
Derivatives are financial instruments based on an asset: cryptocurrency, commodity, securities, etc. They give the trader two advantages:
- Earnings not only on the increase in the asset price but also on its fall.
- Leveraged trading offers the opportunity to increase income but also increases risk.
BitCoke derivatives in Malaysia give you the opportunity to earn on the exchange rate difference of the coin in the future. Sign up now and start earning now if you want to start trading with BitCoke Quanto Swap in Malaysia. Have productive trading!