Huobi has been the latest cryptocurrency exchange to launch perpetual exchanges. The new product is live on Huobi DM, the company's derivatives trading platform.
Contracts are similar to BitMex futures with no expiration times, commonly known as perpetual swaps, they are becoming increasingly popular with cryptocurrency exchange companies. Last year Binance and OKEx introduced perpetual swaps, and now is the time for Huobi to join the tendency.
Huobi DM already provides cryptocurrency derivatives, including Bitcoin futures with expiration of weekly, bi-weekly, and quarterly contracts.
The platform now offers perpetual swaps. These derivatives allow traders to gain exposure to Bitcoin without owning it. The product is similar to a futures contract that mimics the spot price of the cryptocurrency, but has no expiration or settlement. Platforms typically exchange payments between buyers and sellers every 8 hours.
Ciara Sun, vice president of the global business unit of the Huobi group, explained:
"As we have recently experienced, sudden market changes can have a significant but temporary impact on the broader financial ecosystem, but volatility itself is a very normal part of the market cycle. Perpetual exchanges provide operators with another tool in their arsenal to capitalize on market movements and create arbitrage. ”
Bitcoin's perpetual exchanges will have maximum leverage of x125
Huobi likely oversaw how other exchanges behaved and implemented best practices from his own perspective. In particular, the derivative platform allows a maximum leverage figure of up to x125, as in the case of Binance. This suggests that the initial deposit of traders for a position can be increased 125 times to maximize potential profit. However, the risk of loss is also much higher, which is why most experts caution that such instruments should be allowed only for institutional and professional investors.
Elsewhere, BitMex and OKEx's maximum leverage is 100x. When Binance first announced its maximum leverage figure, He received to much critics.
"Perpetual exchanges have been on our roadmap for quite some time, but we wanted to make sure we had the correct risk controls in place before making them available to users," Sun explained.
Initially, Huobi only supports BTC exchanges, but will soon add ETH, EOS, and LTC.
Recently reported Huobi would compensate traders who lost funds due to system failure during the collapse of the cryptocurrency market.