Perpetual FX swap listings on BitMEX
A new breed of cryptocurrency derivatives is coming to the platform. For a week, users will be able to trade cryptocurrency with the first ever perpetual FX swaps listed – with up to 50x leverage.
This is an additional feature that will allow users to trade and speculate on some of the most popular forex pairs 24/7 – even when the foreign exchange (FX) market is closed. What’s more, users will have the opportunity to go long or short forex pairs (e.g. EURUSD) – fully margined and settled in Bitcoin (XBT) Tether (USDT ERC-20). The introduction of foreign exchange swaps will unlock new trading strategies and enhance the overall versatility of BitMEX. This is all part of the ongoing focus on offering the existing and new users a wider range of cryptocurrency margin contracts, including allowing traders to trade different currencies and products.
Ahead of their arrival, this blog post provides more details on the 22 upcoming FX swap contracts. Get ready, read on for the introductory guide on Forex Swap for Crypto Profits, or click here to create a BitMEX account today.
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Perpetual FX Swap Explained
A new type of cryptocurrency derivative created by BitMEX, FX perpetual swaps allow traders to take advantage of price differences in foreign currency pairs such as EUR/USD and USD/MXN. Users who trade the FX contracts can deposit in Bitcoin (XBT) or Tether (USDT ERC-20) – and profit in the form of XBT or USDT – due to changes in the exchange rate of a particular foreign currency pair. Because their margin and settlement methods are entirely in cryptocurrencies, the FX perpetual swaps can be traded 24/7 – with no exposure to fiat. The contract will trade before the close on Friday when the foreign exchange market is closed and no foreign exchange prices are available. Like the other perpetual swaps, BitMEX’s FX perpetual swaps also pay a funding rate (i.e. paid periodically to long/short traders based on the difference between the perpetual contract market and spot price).
Perpetual Contracts: Key Features
Perpetual swaps are similar to futures contracts, which allow traders to buy or sell an asset at a specific price on a predetermined date. That said, perpetual contracts have several notable features:
Perpetual contracts are perpetually traded, meaning there is no expiry or settlement other than the early settlement event described further here. Traders can hold perpetual swap contracts as they wish, as long as they maintain sufficient margin to maintain their positions.
Perpetual contracts mimic a margin-based spot market and therefore trade close to the price of the relevant reference index.
The funding rate mechanism is used to tie contracts to their underlying spot price.
This is in contrast to futures contracts, which may trade at significantly different prices; the reason is that futures contracts expire in the future and have a positive or negative time value element attached to the uncertainty of that expiration.
Perpetual contracts are a popular option among more advanced traders who want to profit from changes in the price of an asset without needing to hold the asset itself.
Go to BitMEX’s Official Website
What does margin mean in cryptocurrency?
Margin trading allows users to build larger positions by requiring less collateral. It is also sometimes referred to as ” leveraged trading” because it provides traders with greater purchasing power to leverage their positions. Traders with leveraged positions face greater risk, but also have the potential to reap greater gains. This is different from normal spot trading.
In the world of cryptocurrency derivatives, margin refers to the amount of capital required to enter a leveraged position. So, when we refer to the upcoming FX contract as USDT- or XBT-margined contract, we mean that the contract is margined and settled in USDT or XBT.
When trading futures and perpetual swap contracts on BitMEX, traders do not need to put 100% of their collateral as margin – this means users can trade on Forex perpetuals with up to 50x leverage, and in the Some contracts are traded with up to 100x leverage. In other words, users can trade in notional amounts that are multiples of their collateral.
What is a Forex trading pair?
A foreign currency pair is a quotation of two different currencies – the amount you would pay to exchange one currency for a unit of the other. For example, when someone’s EUR/USD forex pair is quoted at 0.9000, it means they can exchange 1 EUR and get 0.9 USD. Forex pairs are traded on the foreign exchange market – the largest and most liquid asset class in the world.
In the foreign exchange market, currency unit prices are quoted in the form of currency pairs. The first currency in a currency pair quote (for example, ‘Euro’ in EUR/USD) is considered the “base currency”, while the second part of the quote is the “quote currency”.
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How Perpetual FX Swap Products Work
The mechanics of the perpetual FX swap products are as follows:
Forex perpetuals are traded on exchanges through the Central Limit Order Book (CLOB). The funding rate mechanism ensures that the transaction price remains close to the index price (which is an aggregated foreign exchange spot price).
When the funding rate is positive, longs pay shorts. When it is negative, shorts pay longs. Here are some examples.
Traders can buy FX perpetuals through limit and market orders. The liquidity of the order book determines the spread and slippage in a transparent manner.
The FX swaps are margined and settled in Tether (USDT ERC-20) or Bitcoin (XBT).
The FX swaps allow users to trade with up to 50x leverage, which means users do not need to put 100% of their collateral as margin.
There are three types of perpetual foreign exchange contracts on BitMEX:
- Dual Currency Contract: This is a cryptocurrency derivative where the base currency pair is denominated in two assets, but the derivative is settled in a third “dual currency” asset. As with all listings of this type, the Dual Currency FX Swap has a fixed XBT multiplier — a trader will gain or lose a certain amount of XBT on a particular movement in the price, regardless of the FX price (for example, doing A trader with 1 more USD INR contract will earn 1 satoshi for every pip (0.0001) price rises.
- Inverse contracts: When trading inverse contracts, users first deposit a specific cryptocurrency, and these contracts are settled in the relevant cryptocurrency (rather than the quote currency). For example, users who trade USDT/MXN will receive their compensation in USDT.
- Linear Contracts: These are linearly settled contracts that do not directly touch fiat, but are paid in more intuitive USD-like assets (i.e. stablecoins such as USDT).
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Forex Swap Trading: Some Examples
To illustrate the benefits of forex perpetual trading, we list a few examples below (needless to say, none of the people mentioned below are real):
- Hedger
- Amy is a trader with trading positions and margins in USD and USDT. With the euro hovering near dollar parity, she wants to protect the value of her euro holdings – so she decides to go long EURUSDT, a linear FX swap to sell the dollar against the euro in aggregate. When the EUR appreciates, her swap position will gain value – which then offsets her EUR loss on USD/USDT. Conversely, if the euro depreciates, her swap position will lose money and her trading position will increase.
- Speculators
- Becky, a BitMEX trader, has a strong directional view that the South African rand (ZAR) will weaken in the near future based on upcoming global events. She wants to profit from this view – using her bitcoin holdings to trade USD/ZAR FX swaps, which are margined with XBT. Therefore, she is long 10,000 USDZAR dual currency swap contracts at 17.00 with 20x leverage. 0.0001 XBT is earned for every 1 zal added to the price of each contract. If the price rises to 18.00, Becky will gain 1 XBT on her position (before capital gains/losses) – bringing the return on capital to 117%.
- Market Maker:
- Todd is a market maker (ie a user who places market maker trades on BitMEX) and acts as a liquidity bridge between BitMEX and traditional financial markets. Todd is making markets on BitMEX – for example, 6.77-6.78 one-way on USDTCNH FX swaps, and is ready to react to their various trades. If a trader buys from Todd at BitMEX’s quote of 6.78, he will try to neutralize his risk by placing a market order on another venue. In this case, based on the current fee schedule, he will earn a pip rebate as a market maker on BitMEX, which he hopes is more valuable than the cost of market delegation on traditional financial venues. He makes money by taking the bid-ask spread on a regular basis while remaining as risk neutral as possible.
- Arbitrageurs:
- Like Todd, Bob also has access to BitMEX and traditional financial markets and acts as a liquidity bridge between the two worlds. As an Arbitrageur (an arbitrageur, excuse the French), he is always looking for risk-free or low-risk trades to profit from short-term differences in two markets. He may have noticed that after adjusting for funds, NZDUSDT was trading at 0.6300 on BitMEX, while the NZDUSD spot market was at 0.6200. Expecting this price difference to narrow, he sells 1 million NZDUSDT contracts and buys 1 million NZD vs USD in the fiat spot market. If the price converges to 0.6000, he will earn $30,000 on his BitMEX position and lose $20,000 on his spot position – which means he will earn around $10,000.
Go to BitMEX’s Official Website
BitMEX Coming Soon: More Listings, Offers and Giveaways
BitMEX has been working hard behind the scenes to improve the accessibility of the platform. In the coming weeks, BitMEX will be rolling out more crypto derivatives contracts, BMEX offers and Twitter giveaways – including a USDT giveaway to celebrate the debut FX swaps product. More relevant information will be announced gradually.
Download the BitMEX mobile app, trade your favorite cryptocurrency derivatives contracts and spot pairs on the go, and connect with BitMEX on Discord, Telegram and Twitter to be the first to know about the new listings and giveaways.
Please check BitMEX official website or contact the customer support with regard to the latest information and more accurate details.
BitMEX official website is here.
Please click "Introduction of BitMEX", if you want to know the details and the company information of BitMEX.
Comment by Hans
April 24, 2024
as I am trading here various assets, for me it's the most important feature. i mean, flexibility in tradable markets. i alternate trading styles, meaning that sometimes I trad...