Bitcoin derivatives platform LedgerX is launching a new, simplified interface that lets bitcoin investors earn interest on their holdings.
The new service, announced Tuesday, operates similarly to its existing bitcoin call options with a streamlined user face for investors, according to LedgerX president and chief risk officer Juthica Chou.
“We’re seeing more and more demand for people who want to earn some sort of interest off their bitcoin and lending is not exactly natural to people – especially lending where they earn their interest back in bitcoin. So we’re seeing participants come back to trading.”
Essentially, participants place a bet on what bitcoin’s price will look like at some point in the future. If the price grows to that level within the time period, the participants recoup their investment. In the event that it doesn’t, participants can sell their coins and receive fiat currency from the profit on that sale.
This is “by far the largest trade that we’ve seen people coming in to do,” Chou said. “I would say that more than half our volume has been in this kind of trade.”
“The contract that people are entering into here is such that they’re selling an upside call option, so probably call it [two times] where bitcoin is now. If bitcoin tanks, they still collect the exact same premium and if bitcoin goes up then they end up selling bitcoin at about [two times],” she explained.
Chou added that “overall, I think the volatility is what impacts us … the more [bitcoin’s price] moves, the more fiat [investors] can collect.”
Only eligible contract participants, as defined by the U.S. Commodity Futures Trading Commission, can trade in these call options, however. Users need to undergo “the same [know-your-customer] and application process as standard LedgerX” participants, said Chou.
“I think given the price action people are going to be more and more interested … we’re very excited, because this is something we’ve seen a lot of on the LedgerX platform.”
Zach Dexter, Juthica Chou and Paul Chou image courtesy Juthica Chou