One of the world’s largest Bitcoin exchanges, OKCoin, has just announced yet another service they will be adding for their Bitcoin traders – futures. Futures allow for traders to hedge their risk when dealing with high levels of volatility, which is one of the largest challenges Bitcoin faces at this time.
Futures trading is something offered on most stock brokerage service such as E*Trade or TDM Ameritrade, and is now coming to the Bitcoin arena. OKCoin’s futures trading allows traders to “lock in” future prices to buy their coins. Futures are legally binding agreements between two parties to purchase a stock at a predetermined price. In this case users are promising to buy or sell Bitcoins to the exchange at a certain price between a given date, in effect “locking in” the price. If the value drops, traders can cash in their futures and sell their coins at the higher “fixed” price, or if the value goes up, traders can purchase coins at the cheaper “fixed” price.
Star Xu, who is the founder and CEO of OKCoin, said that this move was in part to bring professional trading tools to cryptocurrency investors.
“Today’s launch of bitcoin futures trading capabilities builds on the algorithmic trading tools we pioneered and launched on our platform last month. We have already seen a favorable response from institutional and individual investors. We are helping to make participation in Bitcoin a more safe and stable process. The ability to trade futures will further cement our position as one of the world’s leading bitcoin exchanges.”
OKCoin is making a move towards adding more professional features to their trading platform in order to bring more professional traders to the scene and added validity to their exchange. In June of this year OKCoin launched Margin Trading with P2P lending. This feature allows traders to borrow up to three times their capital or lend their funds for a fee.
By adding futures, OKCoin believes that while most users will use them to avoid risk due to volatility, sophisticated investors will use them to utilize higher leverage opportunities for price speculation. By moving the volatility away from the underlying asset, derivatives trading allows for decreased volatility and an increase in price predictability. As more traders begin using futures, we may see a stronger and more stable price for bitcoins.
OKCoin will be using a comprehensive USD Price index derived from prices on 10 different Bitcoin exchanges. This will help insure that they are gathering accurate pricing data for their futures contracts.
Even though there has been a decrease in volume, OKCoin has remained China’s largest Bitcoin exchange and one of the world’s largest cryptocurrency exchanges not only in volume but users and page views. OKCoin’s trading fees range from extremely low to 0%, which has continued to attract traders from all walks of life and increased liquidity.
The beta-launch is expected to last for two weeks before going live.
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