Huobi Insider Recap-Huobi Futures: Innovation and Growth in 2020
“…and that’s why we’ve been always putting a hundred percent of our energy to develop new products because they’ve been telling us about these needs.” — -Ciara Sun, Vice President of Huobi
In the last year, we have witnessed Bitcoin bucked up from $3,800 to higher than $34,000, DeFi’s booming starts changing the financial ecosystem fundamentally, and the crypto itself steps on the hall from the bleak corner and becomes to the new star welcomed by institutions and capital markets.
Founded in December 2018, Huobi Futures also flourishes in 2020 through continuous increase in product varieties and innovation in product functions. Following our first product coin-margined futures, in March. 27 this year, we launched coin-margined swaps and ranked first in the world in terms of 24h trading volume within 45 days. In September and October, we introduced USDT-quoted options and USDT-margined swaps.
“We have been committed to improving users’ trading experience, for example, designing user-friendly functions, upgrading our risk-control system, so users could fetch out maximum benefits when trading on Huobi” said Ciara, Vice President of Huobi.
In this Huobi Insider, Ciara, the vice president of Huobi, invites two guests to discuss about the growth of Huobi and the whole industry in 2020. The first guest is Christian, who is the CEO of Cudera, a Swiss based prop trading company, and the second guest is Ingyu Koh, who is a professor at the Korea Advanced Institute of Science and Technology.
Guest 1: Christian Oesch is the CEO of Cudera Ltd. a swiss-based prop trading company. Cudera was started in August 2018 and is focusing on digital asset derivatives. They are providing liquidity through high-frequency and delta neutral strategies.
Guest 2: As a theoretical physicist, Ingyu Koh applied to Optical Character Recognition of Korean and Chinese Characters in collaboration of KAIST and IBM. Now he applies Artificial Intelligence to Finance with High Frequency Technology.
Rapid increase in derivatives trading volume
According to the data obtained from Token Insight, for derivatives industry, the total transaction volume of the digital asset derivatives market in the third quarter of 2020 reported $2.7 trillion, a year-on-year increase of 160% from Q3 of 2019.
Regarding this huge increase in total volume for derivatives market, Christian concluded three reasons:
1. Derivatives are just way cheaper to trade than spot markets. And if traders have a signal that is not strong enough to be exploited on the spot market, they can still do it with the derivatives.
2. Macro reasons. We’ve seen a lot of increase in institutional volume and massive new market entrance and this is kind of like influenced by monetary policy and the story of Bitcoin as an inflation hedge.
3. The system has grown to a large complexity. We see a lot of different derivatives nowadays. We see DeFi, we see this whole decentralized markets like the marketplaces we have on Asia, Europe and U.S. marketplaces. The more complexity, there will be more volume.
And professor Ingyu Koh also had his say on this point. He thinks that the fundamental reason for the upsurge of the derivatives market trading volume is that there are many IT companies, who have a huge cash active in their balance sheet. This kind of investors are quite different from the older traders; they do not look for trading purposes. Due to this COVID-19, the purchasing power had declined sharply, so they look for Bitcoin and Ethereum as the cash and they can buy and hold them for a long time.
Skyrocketing BTC price
The market is the aggregation of investors. When we look at the futures and swaps trading volume this month, it is easy to find that investors’ confidence for the BTC is strengthened after Bitcoin hits $30,000. Regarding the skyrocketing BTC price, professor Ingyu Koh analyzed that the fundamental reason is that the institutional investor has increased a lot after the landmark price of the $30,000 for the point. Now the correlation between the cryptocurrencies and the older assets are quite low. Therefore, from the market diversification portfolio, the institutional investor has a very strong motivation to invest in a cryptocurrency and they need different kinds of instrument, like an underlying spot market, and then a future market, swaps market and option market for the derivatives.
Christian believes that beyond the reason of increased institutions, the skyrocketing BTC price is mostly driven by the monetary and fiscal policy. People try to use Bitcoin as an inflation hedge. And he thinks this is quite a strong story and this story will continue in the long run at least. However, for this to make sense, he thinks the volatility of Bitcoin needs to go down so that it can be comparable to gold. However, currently the whole market is really leveraged.
More choices and convenience on Huobi Futures
2020 can be said to be a period of rapid growth of Huobi Futures. On Mar. 27, 2020, Huobi Futures launched its second product coin-margined swaps and exceeded BitMEX, the largest coin-margined swaps exchange at that time, in 45 days. On Sept. 1st, Huobi Futures introduced their third product USDT-quoted options, then on Oct. 26, the fourth product USDT-margined Swaps comes out and in just two months, its cumulative trading amount exceeded $177.8 billion and accounted for 35% of the total trading volume at the end of December.
To improve the asset utilization and to reduce trading cost for users, Huobi Futures also introduced lots of innovative features in 2020 like cross margin mode, locked margin mechanism, upgraded take-profit and stop-loss, real-time settlement, Follow a Maker & Taker, etc.
“I talked to a lot of institutions all the time and listening to their feedback, their needs and that’s why we’ve been always putting a hundred percent of our energy to develop new products because they’ve been telling us about these needs. So as the results, we’ve been designed a lot of innovative functions to save users’ transaction time and costs.” said Ciara.
In this interview, professor Ingyu Koh shared us with his opinion on the cross margin mode. He believes that the USDT-margined swaps market has a very strong potential because of cross margin function. Under the cross margin mode, the entire margin balance is shared across open positions to avoid liquidation, indicating that any realized PnL from another position can aid a losing position that is close to being liquidated.
Regarding the new features that Huobi futures will be introducing in the coming 2021, Christian suggested that there’s probably still a room to add more volatility products. Besides, he said he expects some improvements in knowing the exact state of the book and the pools.
Protect users in a turbulent market
From Dec. 16, the price of Bitcoin rose fast and broke through $20,000 on Dec. 16 2020. As of Dec. 17, Bitcoin’s price once hit $23,652 and has kept above the $20,000 line for more than 40 hours. Many audiences are curious about Huobi keeping profitable users from lightening their positions in this turbulent market.
Regarding this question, Ciara gave her explanation: “I’d like to say that in a turbulent market, what we need to do is to protect our loss-marking users from being liquidated and to ensure our profitable users to gain all profits they earned. We are the first digital asset derivatives exchange in the industry that supports a three-phase liquidation protection mechanism and no transaction fees will be charged in partial liquidation. Moreover, we use EMA as a second reference for forced liquidation. Due to our mature risk-control system, we’ve been holding a record of zero clawback since launch in December 2018. We promise that the platform will never trigger the clawback mechanism as long as the insurance fund is positive. Another problem is, many platforms have set up an automatic positions reducing mechanism. Though they claim to have prepared a large amount of insurance fund, there are profitable users who are forced to lighten their positions from time to time. It’s a common sour point in the crypto derivatives market, but will never happen on Huobi. We promise that the platform will never reduce the positions of profitable users, so as to ensure that our users could get all profits they earned.”
VIP+1 policy based on USD evaluation
Many audiences mentioned that due to the soaring BTC price, the threshold for becoming a VIP on some platforms is becoming higher. So they would like to know the VIP membership system of Huobi Futures.
To this problem, Ciara said that we know most exchanges require at least hundreds of BTC to be traded per month to reach their VIP standard, this is not reasonable when the Bitcoin price has risen by 400%. On Huobi Futures, as long as you have assets worth of 30,000 USDT in Huobi Futures account, you will be qualified for VIP. In addition to that, Huobi introduced an upgraded VIP Sharing Program, that is, VIPs of any other exchanges are considered as Huobi Futures VIP+1. Therefore, you could provide certificates of VIP level on other platforms to apply for a VIP+1 level on Huobi Futures.
To view an intact video on YouTube: #Huobi Insider, Huobi Futures: Innovation & Growth in 2020! — YouTube
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