CoinfloorEX, founded last year as a unit of London-based Coinfloor, the UK’s oldest Bitcoin exchange, will relaunch in February as a spinoff and will be rebranded as CoinFLEX (Coin Futures and Lending Exchange). Domiciled in Hong Kong, the new exchange is launching physically delivered cryptocurrency futures.
The derivatives, offering leverage of up to 20 times, will be available next month to its target market: Asian retail investors.
In an interview with Bloomberg, CoinFLEX CEO Mark Lamb says the platform will offer futures for Bitcoin, Ethereum and Bitcoin Cash.
The introduction of the new exchange may scoop upcoming cryptocurrency platforms Bakkt and ErisX, projects that have been frontrunners in the race to offer physically settled Bitcoin futures. Announced in August of last year, Bakkt is a new Bitcoin exchange that will allow consumers and institutional investors to buy, sell, store and spend cryptocurrencies. It also expects to offer physically settled Bitcoin futures.
Announced in October of last year, ErisX plans to launch a derivatives exchange and clearing organization that bring together digital asset futures and spot contracts onto a single, fully regulated platform.
Both Bakkt and ErisX, heavily backed by major Wall Street investors, are expected to launch in the first half of 2019, pending further developments and regulatory approval.
In addition to these platforms, CoinFLEX will challenge BitMEX, the world’s largest crypto futures exchange. Also based in Hong Kong, BitMEX has maintained a tremendous edge among traders, as it offers 100 times leverage on various crypto futures contracts.
“I’ve been in the market for six years, so seeing this kind of 80% correction is really nothing new. Bear cycles in crypto can go on a long time but ultimately, this is an asset class that it is one of the most fascinating, volatile – which is great for traders – assets in the world. And it’s really exciting because it has the potential to become one of the major currencies in this world.”
Lamb explains why he believes his company’s physically-settled futures have an advantage over competitors.
“If you’re trading a cash-settled future, you’re open to manipulation of the index at the time of settlement. If you’re a market maker where you’re doing a basis trade, where you’re arbitraging the cash and spot markets, the cash markets versus the futures market, what you really want to be sure about is, at the time of expiry, you know exactly what you’re going to get…
“With a physically-delivered future, it really ties the future’s price to the actual, underlying asset because at expiry, everyone knows what they’re going to get. Everyone who’s short, delivers Bitcoin, receives cash. Everyone who’s long, delivers cash, receives Bitcoin. So that kind of tying down to the real world allows these types of futures to be used for much more than just speculation. They’re great speculative tools, but they become useful for commercial hedging, hedging miner exposure, hedging and OTC trade, or making markets.”
Lamb believes the Asian-based crypto futures exchanges will continue to dominate the space, as US-based players, such as Bakkt and ErisX, contend with US regulators.
“We think that that’s likely to continue because the US is trying to clamp down on the leverage offered by these futures, and also, the time duration offered by these futures contracts.”
He says that’s not what traders want.
“If you’re trying to deal with a global audience versus one country or one region, it’s a very different picture. If you do end up getting regulated by one regulator or one jurisdiction, or one nation, you’re actually limiting the amount of exposure and the amount of outreach you can have to the rest of the global audience. So we’re really excited about being a global, large, scalable crypto derivatives exchange, and for that approach you need to be off shore.”
CoinFLEX is owned and operated by early Bitcoin investor and Bitcoin Cash supporter Roger Ver, Trading Technologies, Mike Komaransky, Dragonfly Capital Partners, Global Advisors, B2C2, Amber AI, Grapefruit Trading and Alameda Research. According to the announcement, the consortium plans to meet “market demand for a global, scalable and secure crypto futures exchange.”
The new exchange will also introduce the world’s first stablecoin-to-stablecoin futures contract, offering Tether (USDT) against Circle’s USD Coin (USDC). Pegged to the US dollar, stablecoins allow traders and investors to trade quickly and efficiently on global cryptocurrency markets without the need for bank wires that can slow down transactions and trades.
Coinfloor will retain an equity stake in CoinFLEX.