On July 2, 2019, Changpeng Zhao, the founder and CEO of Binance, announced their plans to launch futures contracts at the Asian Blockchain Summit in Taipei. The contracts will allow up to 20x leverage and Zhao has hinted at the release of a test version as early as two weeks from now.
Binance Continues Expansion
The king of cryptocurrency exchanges continues its growth story with the launch of its futures contracts by the end of Q3 2019. At the Asian Blockchain Summit, Changpeng Zhao’s presentation included a snippet of the Binance futures engine on the exchange’s UI, indicating that the exchange has had this in the pipeline for quite some time.
Binance aims to bring margin trading to its exchange by July 11, 2019, and this is set to help them grow their revenue through fees and crypto margin loans as well as increase their user base.
Margin trading on Binance will undoubtedly increase activity on the platform as it is a feature people have been waiting a long time for.
What the Launch of Futures Signifies
Zhao is pulling out all the stops to turn Binance into the undisputed leader of centralized and decentralized crypto exchanges. Derivatives in general aid inefficient price discovery for assets and securities, as seen in traditional capital markets.
With focus shifting to futures contracts as a way to legitimize the Bitcoin market, Binance is leveraging their high liquidity and active user base to become a one-stop-shop for those looking to engage in the crypto derivatives market.
Zhao’s announcement was vague, making sure he didn’t spill any crucial details. Some interesting aspects of the contracts turn around whether they operate as a contract for differences (CFD), simply settling the cash amounts, or whether it will allow for physical settlement.
If Binance allows for physically settled futures, they will become a prime destination for hedgers and institutional players. Another interesting aspect is whether the futures will only be available in BTC or other altcoins as well.
Binance continues to dominate the exchange game, and would’ve seen a significant increase in market share in 2020 if it wasn’t for their decision to halt services to those in the USA. All that’s left now is for Binance is to onboard sidelined institutional firms.