On June 19th, the Binance Director of Derivatives, Justin Cheng, was invited to join an AMA in the Ontology English Telegram the Co-founder of Ontology, Andy Ji, to share their insights and guidance on Futures trading.
Check the chat message history of AMA here.
Section 1: Top 10 pre-selected questions
Justin: Binance Futures is not exclusively only for professional traders, but futures and all other derivative products are advanced products so it is important users should familiarize themselves first.
If you are a complete beginner to cryptocurrency entirely, we strongly recommend they invest the time to learn. Developments in the crypto market move fast but the fundamentals will always be there: understanding why Bitcoin and cryptocurrency are important, understanding the principles of spot trading versus futures trading. It is important to grasp the foundational concepts of cryptocurrency. As trading is a financial activity, it is also important to recognize and understand the risks involved.
Binance Academy provides very useful information and educational resources, we would recommend users check it out.
Justin: “Derivatives allow you to margin or leverage trading, meaning you can enter a trading position with a value much larger than your invested trading capital. The leverage is the multiplying ratio between the two values.
This means unlike a 1:1 trading ratio, you have the potential to hedge or make returns at a higher ratio, but it naturally also means a larger potential loss if the market moves against your trading position.
We strongly recommend users to only take risks they could handle, and we have position limits for users using high leverage. For example, users trading ONT with 50x leverage can only open 5000 USDT worth contract and with 20x the position limit is 25000.
Actually, if you trade ONT at 50x and open a 5000 USDT position, the capital you need to have is only 100.”
Justin: This is a similar question to the question above, we do have a price limit to prevent fat fingers.
In cases where the market moves too abruptly, we activate our insurance fund to cover the traders’ additional losses beyond their invested trading capital. We have used our insurance fund a few times and we are known in the market for how we help protect our users.
Last month in May before the third Bitcoin halving, the market saw sudden volatility and we used around $7-$8 million to help protect users. The next day we invested another $30 million into the insurance fund. We could not know if the prices will move abruptly again, but we know we want to protect our users.
Justin: We talked about the insurance fund earlier on. When it comes to stability and reliability, we have probably the most stable and reliable trading system in the market.
We pay utmost attention to the design and stability of our matching engine right from the start because we want to make sure our system is ready for the long-term. As a result, we can confidently say that our system is capable of NASDAQ-level output. We can handle 100,000 orders per second with an average latency (speed) of 5 milliseconds.
Even when the market experienced periods of high volatility, our system worked well with no issues or delays. One recent case was what is now called Black Thursday, on March 12, when the WHO designated COVID-19 a pandemic. Global equity markets were heavily affected, and the price of Bitcoin fell by half. This affected many exchanges as it resulted in a high volume of trading positions being liquidated in a very short time, but our system functioned normally.
Justin: With spot exchange, you are usually trading on a 1:1 ratio. Futures products are more complex because they are designed for hedging purposes and also for arbitrage opportunities. The ratio of returns can be higher, but users must understand the potential downside is also larger. I always advise people to understand the products first. Users should read up on the educational information we have available, and also ask questions. Our support team is always on-hand for the community.
One advantage of trading with Binance is that we provide a convenient single platform, allowing users to trade spot and derivatives, according to their individual preferences and how users wish to manage their own trading portfolio. Most of the time they can conveniently use one single wallet.
And you will be happy to learn that Binance is the only major exchange offering futures trading for ONT. We are glad to be able to support the Ontology community.
Justin: Yes, we have listed it. You can find out more information here.
Andy: Binance is the largest liquidity platform which is offering the ONT perpetual trading.
Justin: We are always listening to the community, and we assess each listing and make adjustments accordingly. At this time, it seems like 50x leverage is popular for #ONT and the community seems comfortable with the level of leverage and risk, but depending on the feedback we may make adjustments again in the future.
Justin: Binance as a company started in 2017, and we only started offering futures last year in September 2019, so relatively speaking we are one of the younger players in the market. Through our hard work and commitment, we have earned the trust of the community and we are thankful that users appreciate the work we put into innovating crypto derivative products.
One of the ways we stay competitive is by finding out what are the tokens in demand, so we can support product development accordingly. This is why we participate in AMA sessions like today’s so we can continue to be close to users and hear their feedback.
We are product and technology-oriented and we truly believe good products that serve users well will stand out from the competition. Binance has brought quite a few innovations to the crypto derivatives industry. Our product is the first USDT denominated futures and it is much easier to understand for users than inverse contracts.
As for market manipulations, we use mark price to do risk management, which is consisted of a price index of most liquid spot exchanges, so it is very hard to be manipulated.
Justin: Currently for ONT, the minimum and maximum perpetual contract sizes are 0.1 and 1,000,000 respectively, and users can have up to 50x leverage. Will we have ONG pairs? That is something we will consider, depending on its popularity with the community and other factors including risk.
Justin: We built Binance Futures to offer a safe, stable platform for users to trade crypto derivatives and we believe a robust derivative market is good for the underlying asset, which is Ontology in this case. Derivatives are important hedging and arbitrage tools, and as the cryptocurrency market gets more and more mature, hedging will become more important for trading strategies.
We are always exploring new promotional and community-orientated activities. For our most recent Quarterly Futures launch, we have a promotion for the first 30 days, where all users will enjoy between 0.010% and 0.015% in maker rebates, as well as a flat 0.020% in taker fees — the cheapest fees for deliverable contracts in the industry.
Justin: Thanks for asking, our contract design is more friendly to users, the trading experience is very similar to spot trading with leverage and our system is very stable especially in volatile period and our users are happy about that as well.
Justin: This is an interesting question. We are looking into it. The thing is we want to protect users, so if we offer something for users to follow, we want them to be winning strategies. Many copies trading bots support Binance, so you could use your Binance accounts on those platforms if you find any good strategies to follow.
Andy: Good question. Actually, Ontology aims to onboard more regional ambassadors and hold more local events. Last year, we hold several Asian, EU trips, and a US university roadshow. We keep improving our product’s user experience and economic model. Therefore, we heard more voices and useful advice from community users. I really want to release my warehouse to send over our T-shirts Bro. After recovering from COVID-19 and global pandemic, everything will be OK.
Justin: We have brought quite a few innovations. I’ve mentioned we introduce vanilla contract with USDT as collateral. Our match engine uses next-generation technology, so we do not have any overloads problem. We introduced a mechanism we called smart liquidation, which is much friendlier to users, and we have a different fee schedule, which is much lower in general.
Justin: Yes, Binance Futures share the same help desk with Binance, so you could have 24/7 support on live chat and by ticket.
Justin: Users should choose the right product that fits their investment goal. The advantages of trading futures are trading with leverage, better liquidity, and having more advanced purposes like hedging.
The example here is an explanation of leverage: at 50x leverage, you can have 100 as collateral, and entering into a position of 5,000. How this is possible is that you are entering into a contract with a counterparty, your 100 capital is collateral.
Andy: Besides ONTOpoints, you can take a look at the ONT trust score. The Higher score ，the more benefits. For example, you can participate in some Defi or Cefi program with a bonus interest rate. You can apply for a lower rate of lending. You can rent a car without an initial deposit. You can buy much cheaper insurance. These are all because you have accumulated the virtual and decentralized credit.
Justin: Derivatives is a crucial part of the secondary market since it is a useful tool for risk management and sophisticated trading. It’s very natural for Binance to enter this world as we are an exchange and it is very difficult to launch a robust futures exchange even for a company like Binance, it took us half a year to develop it.
Justin: Binance Futures share the same wallet and other security setups with Binance.
User friendly always comes first when we are designing our products, so our futures are very suitable for newbies. Binance should be your first platform to try if you want to start with futures.
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