- Bitcoin futures are less prone to manipulation
- Main target is the Asian market
- CoinFlex will have to compete with Bakkt
CoinFlex cryptocurrency exchange is targeting Asian retail investors who are looking for bitcoin futures contracts that are less prone to price manipulation. The exchange intends to offer physical delivery of bitcoin contracts to Asian traders.
Bitcoin Instead Of Cash
According to a post by South China Morning Post (SCMP) on August 26, 2019, the Hong Kong-based cryptocurrency exchange believes that traders will take advantage of physically delivered bitcoin contacts since their prices can be tracked on spot and cannot be easily manipulated.
The cryptocurrency exchange that recently changed its name from CoinFloor Coin Futures and Lending Exchange or CoinFLEX will physically deliver bitcoin futures, so the owner of the contracts will receive the delivery of bitcoin instead of cash upon the expiry of contracts.
The company’s co-founder and CEO Mark Lamb says cash-settlement contracts, whose price is often calculated using a formula based on-the-spot bitcoin prices of other exchanges, can be easily manipulated. Lamb added:
“Professional and retail traders alike are affected by price manipulation in the cash-settled futures market. In physically delivered contracts, anyone long at expiry receives the underlying bitcoin. There are no formulas involved.”
Leveraging the Maximum Benefits
According to the exchange, physically delivered bitcoin futures will tend to face less price manipulation, whereas the process for settling contracts in cash could be manipulated. The cryptocurrency industry is one among the emerging trends in the world of finance, meaning global investors eye on leveraging the maximum benefits meantime avoiding the price manipulations.
Price manipulation was suspected in May when Bitstamp reported a huge sell order on bitcoin that tanked its price by 18 percent in 11 minutes leading to the liquidation of long positions worth about US$250 million on BitMEX, whose contracts reference Bitstamp prices.
Compete with Bakkt
Bitcoin (BTC) is the leading cryptocurrency and CoinFlex believes that Asian-based retail investors will be interested in investing in the bitcoin futures contract, which is rampant in cash-settlement contracts. It is the new cryptocurrency futures exchange; in fact, CoinFLEX claims itself as the first exchange to provide physical delivery of bitcoin futures contracts. For reference, the price of bitcoin in the cash settlement contract is calculated through a formula that uses bitcoin price of other exchanges.
The announcement comes hot on the heels of an announcement by the International Exchange Inc. (ICE), which recently announced launching a similar service in September through Bakkt offering physically delivered futures contracts. CoinFlex, which recently raised a US$10 million from several blockchain investors, including Polychain Capital, Divergence Digital Currency, NGC Ventures II, and Roger Ver, bitcoin cash advocate, launched its trading platform in February.
