BTC/USDT Expiry Future

Summary : I propose BTC/USDT SPOT expiry futures to be traded on our DEX.

  • Motivation : It is one of the highest traded pairs in the crypto derivatives market. The monthly turnover should be easily in billions of dollars if not more. As a result, attracting liquidity should not be an issue.

  • Use cases: The proposed expiry future could be used by traders and investors alike. The traders can speculate on BTC using the proposed future. Also, for investors, this can act as an important hedging tool specially in current times where there is high uncertainty and volatility. I as a HODLer often feel the need for such an instrument to reduce my risk.

  • Differentiation: Currently, a lion’s share of this market rests with the CEX which are against the ethos of decentralisation. Further, most of these CEX have geographical restrictions and are facing increased heat from regulators. The recent case of UK banning crypto derivations proves this. Hence, the only solution is a DEX. But others dexes in the market have been unable to successfully create a dent in the derivatives space. INJECTIVE can change this with the state of art DEX based on the CLOB model. Also, unlike CEX which depend on centralised oracles, we source prices from a host of decentralised oracles making us more stable in case of liquidation related wicks.

  • Implementation: For the price feed, CHAINLINK or BAND would be used as the oracle of choice. The market would be proposed on the governance tab and once passed would be added to the DEX.

  • Risks: One concern is with regards to the oracle provider with regards to price. But considering the decentralised nature of oracle providers for the market, I expect that the associated risk of mispricing would be lower in comparison to CEX.

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Hey, thank you for taking the time to write this one as well!

Decentralized oracle providers provide a robust decentralized infrastructure and aggregate prices from multiple sources so even if we rely on third parties that do not adhere to a consensus mechanism to provide us with that information it’s still aggregated over many sources so decentralized oracles are much more reliable and fault-tolerant.

Perpetual swaps and expiry futures require more parameters opposed to spot markets. In both perps and futures you would have to provide parameters such as, the oracle scale factor (6 for USDT), initial margin ratio, maintenance margin ratio, maker fee rate, taker fee rate, min. price tick size and min quantity tick size.

Also for expiry futures you would have to propose the expiry date, for instance a “BTCUSDT Quarterly 0326” would expire on 2021-03-26 and then a new contract would be generated as “BTCUSDT Quarterly 0625”.

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Pardon my ignorance regarding crypto derivatives… Do BTC based derivatives with 6 month future expiry have significant volume to be of use to the users? If not, then can you please indicate what should be tentative maturity period of these expiry futures to attract highest liquidity and utility?

Quarterly futures are very common

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