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Structural Issues May Be Causing BitMEX’s Low Bitcoin ‘Cash and Carry’ Returns

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BitMEX may be one of the largest crypto derivatives platforms, but it offers the lowest return on bitcoin “cash and carry” trades.

Currently, the return offered by Seychelles-based BitMEX on a three-month basis is 2.71% annualized, half of what rival exchanges like Binance, FTX and Deribit are offering, according to data source Skew.

Cash and carry arbitrage involves buying an asset in the spot market against a sell position in the futures market when the latter is trading at a premium to the spot price. Essentially, carry strategies profit from futures basis – the spread between prices in futures and spot markets – which evaporates on the day of the expiry.  

Bitcoin Futures Annualized Rolling 3-Month Basis (Binance, FTX, BitMEX and Deribit)
Source: Skew

Bitcoin as BitMEX’s sole collateral

BItMEX’s policies and recent history appear to have affected traders’ behavior, thus keeping rates low on BitMEX relative to other platforms. 

“We believe that the difference in the BitMEX premium relates to their single collateral offering,” Patrick Heusser, senior cryptocurrency trader at Zurich-based Crypto Broker AG, told CoinDesk in a Twitter chat. 

BitMEX only accepts bitcoin as collateral, meaning traders can pay or receive margin, profit and loss solely in bitcoin. As such, when the market drops, the collateral loses value, forcing longs to exit by taking offsetting positions. That, in turn, leads to bigger price decline and more “long liquidations,” a forced unwinding of buy positions akin to what can happen in a margin call on traditional futures exchanges. 

“During the March selloff, the network was clogged up, and the liquidation cascade drove prices lower at a faster pace. Assuming it was a closed ecosystem, the danger was that bitcoin’s price on the BitMEX platform could have gone to zero, resulting in a complete wipeout of collateral value and all open positions,” Heusser said. 

skew_bitmex_xbtusd_liquidations-2-3
BitMEX Bitcoin Futures Liquidations
Source: Skew

On March 12, bitcoin fell by nearly 40% to levels below $4,000. The sudden decline, which began from around $7,800, triggered record buy-sell liquidations worth $876 million on BitMEX. These forced closures likely aggravated the price drop. 

Hence, traders are less aggressive in building long on BitMEX as compared to other exchanges like FTX, where they can pledge stablecoins and cryptocurrencies as collateral. That helps mitigate risk arising from sudden price collapse. 

“There is a residual risk market makers have if they get ‘too long’ on BitMEX. Therefore, the general pricing of those futures is slightly lower compared to the multi-collateral platforms,” said Heusser. 

Other platforms

Binance, the leading global cryptocurrency exchange by trading volume, launched a cross-collateral program on its futures platform earlier this year. The feature allows users to trade futures using crypto assets from their Binance Exchange Wallet as collateral, without having to sell any coins. 

Deribit, the biggest exchange by options volume, also offers a single collateral mechanism like BitMEX. Even so, the futures’ basis on Deribit is significantly higher compared to BitMEX. 

skew_btc_futures_annualized_rolling_3mth_basis-2
BitMEX vs. Deribit Futures Annualized Rolling 3-Month Basis
Source: Skew

That’s possibly due to differences in liquidation mechanisms.

On Deribit, positions are liquidated incrementally. “The position will be liquidated in fractional steps to avoid unnecessary reductions, on condition that partial liquidation ensures the margin balance is above the required maintenance margin level,” according to the official blog. A full liquidation occurs as the trader’s margin balance is below the maintenance margin. 

That incremental liquidation allows traders to express their bullish view more aggressively, causing futures premium to widen. BitMEX does not offer a partial or incremental liquidation mechanism. 

BitMEX’s large market share

Further, BitMEX’s high trading volume and order book depth could be responsible for the low basis compared to Deribit. 

As of Tuesday, BitMEX accounted for 14% of the global bitcoin futures trading volume of $16 billion, while Deribit contributed just 2%, according to data source Skew. Further, at BitMEX, the average daily spread between buy and sell orders on bitcoin futures for $10 million quote size is currently 0.4% versus 2.94% on Deribit. 

That said, the low basis on BitMEX does not represent low credit risk. If anything, it indicates the opposite due to the single-collateral structure. 

Disclosure

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.



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Snap Stock Up 16% as Q2 2021 Earnings Beat Analyst Expectations

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Snap stock has risen approximately 184.94%, and 25.76% in the past year and seven months.

Snap Inc (NYSE: SNAP) stock traded 16.31% higher in today’s premarket around $73.24. The notable spike has been directly attributed to the second-quarter earnings results that beat analysts’ expectations. Notably, Snap reported revenue of $982 million in Q2 versus $846 million expected by analysts according to a survey by Refinitiv.

Additionally, the company recorded adjusted earnings per share of 10 cents versus 1 cent loss forecasted by analysts. During the second quarter, Snap’s average revenue per user (ARPU) was $3.35 against $2.92 expected by analysts according to a survey conducted by Refinitiv. Global daily active users (DAUs) hit 293 million users versus 290.3 million according to a survey conducted by StreetAccount.

Snap stock has risen approximately 184.94%, and 25.76% in the past year and seven months. However, they have dropped approximately 6.95% in the past month according to market analytics provided by MarketWatch.

Snap Stock and Company’s Q2 2021 Earnings

On the positive side, Snap noted that the iOS 14.5 update did not make severe changes to its operations as earlier forecasted. Partly due to the late rollout of iOS 14.5 by Apple’s developers.

Jeremi Gorman, Snap’s chief business officer added that the slow adoption of Apple’s software update also significantly contributed. “This has given us more time with advertisers to navigate the transition but also means the effects of these changes will come later than we initially expected,” Gorman said.

One of the key highlights from the Snap second-quarter report was the 53% decline in a net loss to $152 million from $326 million a year ago.

Forward, the company is weighing on different market outlooks, particularly Covid-19 and the rollout of the vaccine. On a year-over-year basis, Snap expects its revenue to grow by 58% to 60% during the third quarter. Additionally, the company said it anticipates hitting approximately 301 million daily active users (DAUs) in the third quarter.

This range reflects our best current estimate of the potential impact of anticipated disruptions associated with the iOS platform changes,” Snap Chief Financial Officer Derek Andersen said in his prepared remarks.

The foreseeable future remains uncertain for Snap management largely due to a resurgence of COVID-19 cases. As a result, the company said it will be operating in an uncertain environment until the end of the year.

The company has a reported market valuation of approximately $99.58 billion as of today with 1.32 billion outstanding shares. Having been rated by 38 Wall Street analysts, MarketWatch found out that Snap stock received an average of Over rating.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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Binance US Pursuing Plans to Go Public, Opts for IPO amidst Regulatory Crackdown

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Binance US will be competing for a public spot proceeding despite facing allegations from global regulators.

Binance US which is a cryptocurrency exchange operating in the American market will opt for an IPO way to go public. The firm is currently in the process of navigating heavy regulatory concerns and crackdowns. Binance CEO Changpeng Zhao has commented on the possibility of the firm listing on an IPO and communicated possible plans of the company concerning regulatory requirements and protocols.

The CEO further highlighted how the company is still embroiled in regulatory trouble with central regulators and had taken accountability for the same. However, Zhao has been confident in making Binance US seek a public spot through the IPO and expressed his decision to accelerate compliance efforts to work in sync with the guidelines to safeguard the company’s interest and stake.

Binance US Opts for a Strategic IPO Listing

Binance US will be competing for a public spot proceeding as a separate company that seeks branding from the global exchange Binance. The company will be taking a fresh initiative to go public in the upcoming months.

It is to be noted that  Binance which is the leading cryptocurrency exchange was facing allegations from global regulators that involve claims such as the company being implicated in illegal trading in the USA. The concerning matter was later investigated by the States Department of Justice and the Internal Revenue Service. Later on, the company was approached by the US Commodity Futures Trading Commission on similar grounds.

Binance CEO Changpeng Zhang has asserted that the company is surely battling regulatory issues and interventions at the moment but is confident enough to accelerate the work operations by shifting the company into the financial domain from a previous tech setup.

The CEO has further admitted that they might encounter troubles with the regulators but this will never disregard the company’s vision to go public one day. Binance US is now pursuing ways to opt for a traditional initial public offering route to seek credible transition.

In a virtual blockchain summit called REDeFINE Tomorrow 2021, Zhao was seen communicating his plans regarding Binance’s prospects and strategies as well the company’s new goal that involves an IPO listing. Zhao later restated that the company will be expediting its compliance efforts that will also include hiring former regulators to speed things up.

In the summit held on Friday, Zhao was seen admitting the fact that the regulatory issue that the firm is currently facing will be mitigated very soon and the compliance efforts will be accelerated to localize communication in a structured manner.

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Juhi Mirza is an archaeology major who is obsessive about blockchain/Crypto technology and deems it to be the foundational philosophy of the future. Her dogged ability to research and crystallise technical facts/multiple perspectives into rivetting stories makes her an accessible finance writer. She tends to her archaeological pursuits and loves unearthing the past over the weekends.



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TSLA Stock Up 2% Yesterday, Musk Anounces Opening Tesla Supercharger to All EVs

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Tesla is planning to make Superchargers that are accessible by all vehicles in most of the countries.

The founder and CEO of Tesla Inc (NASDAQ: TSLA) Elon Musk announced that the company’s chain of fast-charging stations for its electric automobiles, aka Tesla’s Supercharger network, will commence serving other brands of electric vehicles from this year.

Meanwhile, Tesla stock went up by 2% yesterday, reaching $660.50. Today in the pre-market, the stock lost 0.23%.

The tweet was posted on Tuesday by the business magnate. This announcement follows years of gossip on the development of Tesla charging stations that are compliant with all electric vehicles.

Despite the tall claims by Musk, there has, as of now, not been any communication on the details about this venture. For starters, where will the DC fast-charging stations be set up still remains a question. However, according to the Billionaire, Tesla is planning to make Superchargers that are accessible by all vehicles in most of the countries.

In recent times, the billionaire has communicated the idea of introducing Superchargers to other EVs and collaborating on the technology together. In an interview in 2014, Musk suggested contributing and curating designs to create a mainstream blueprint that can be exchanged across industries.

In a gathering in 2018, Tesla CEO had, however, answered a query during an earnings call that the Supercharger Network is not anomalous to a ‘walled garden’. By this, the billionaire wanted to suggest that different brands and designs of EVs might have different charging stations that are compatible.

The most critical marketing strategy for Tesla Electric vehicles has been the fact that the company has exclusive charging stations. This herculean advantage set the company apart from its competitors in battery vehicles. The Tesla charging network is accessible to operators of Tesla vehicles without any membership fees. The company keeps a tab of the charging per minute or kilowatt-hour.

The company’s new level 3 Charging Stations have not been opened to the general public, and are available only to the owners. The connectors used in powering the vehicles can be plugged into Tesla vehicles only, enabling less crowd and higher accessibility to the Tesla customers.

Several US companies have discussed and struggled to provide charging stations that cater to battery vehicles from different brands. The companies include ChargePoint, Electrify America, Sema, and many others. Tesla’s website claims that the company currently manages more than 25,00 charging stations across the globe.

In December 2020, Musk mentioned his company’s plan to create Supercharging stations for all electric automobiles. In a conversation with YouTuber MKBHD, Marques Brownlee, the billionaire said that other Brands of EVs were “low-key” on the lookout for access to Tesla’s Superchargers and that the apparatus was already being made available to other electric cars.

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Sanaa is a chemistry major and a Blockchain enthusiast. As a science student, her research skills enable her to understand the intricacies of Financial Markets. She believes that Blockchain technology has the potential to revolutionize every industry in the world.





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