A new token lets traders make gains whenever bitcoin's price falls.
Swiss fintech firm Amun launched its BTCSHORT (BTCS) daily inverse token Wednesday, which returns gains based on inverse price movements of bitcoin (BTC) in a given 24-hour period. The product complements a recent bitcoin inverse exchange-traded product (ETP) released by Amun in January and now overseen by sister firm 21Shares following a March rebranding.
"Typically, these purchases are short term in nature, usually on a daily basis, as the holder aims to move in quickly to leverage a near-term decline in bitcoin to make a positive return," the firm said in an announcement.
Designed as a stablecoin, BTCS is built on Ethereum's ERC-20 token standard, meaning it's as easy to purchase as any other token and will be available on secondary markets beginning with Liquid, HitBTC and Bitcoin.com, Hany Rashwan, CEO of Amun and 21Shares, told CoinDesk in an interview.
"Demand for these leverage and inverse tokens is tremendous," Rashwan said. "The users want the ability to buy these kinds of products in an easier and safer way."
Rashwan said BTCS was purpose-built for traders of all stripes: retail to institutional. Moreover, the token was released before the May 11 bitcoin halving in order for traders to hedge against potential volatility, Amun said.
The token was designed under the practices and standards developed by 21Shares, Rashwan said. The firm currently lists 11 ETPs on multiple European stock exchanges including the SIX Swiss.
For compliance reasons, minting and burning BTCS is conducted on the Amun platform in exchange for the dollar-backed stablecoin USDC and remains off-limits to U.S. and Swiss investors, along with internationally sanctioned nations.
Rashwan said Amun will roll out similar inverse tokens, including one for the second-largest cryptocurrency by market cap, ether (ETH), in the coming weeks.
With BTCS, the firm is primarily catering to the risk-averse side of the crypto market, investors who would rather trade regulation-compliant products, Rashwan said.
"Regulations are important and it is just astounding to me how that's now a contrarian opinion," he said.
Alternative derivatives markets such as BitMEX, Binance and FTX often stand on the other side of the moat. For example, BitMEX and FTX operate out of the lightly regulated Seychelles and Antigua and Barbuda, respectively, while Binance CEO Changpeng "CZ" Zhao frequently reminds his Twitter followers of his firm’s decentralized work environment and is somewhat hazy on where the company is based.
Either way, new products are chasing the money flowing into crypto derivatives platforms, which Rashwan said would likely overtake spot cryptocurrency trading in the near future.
One new product that perhaps best highlights this innovation would be FTX's (i)BVOL financial instrument, which made its debut late last month.
(i)BVOL comes in both a long and an inverse form – hence the (i) – and generally "tracks market implied volatility," FTX and Alameda Research CEO Sam Bankman-Fried said in an email.
Like the BTCS token, the (i)BVOL token is built on the ERC-20 standard and a separate in-house contract called MOVE that gives "traders the ability to buy and sell bitcoin volatility over different time periods on margin," Bankman-Fried said.
Notably, these tokens free traders from margin maintenance, known to be a sticky issue in crypto derivatives trading.
FTX and Amun's tokens perhaps suggest ERC-20-based, wrapped derivatives are a good solution for retail users who can struggle with complex derivatives products.
Rashwan pointed to the March delisting of a different set of FTX tokens from Binance's derivatives platform as a salient example for Amun. As CoinDesk reported, Binance's CZ removed the BULL and BEAR leverage tokens from his platform, arguing that "users don't understand" the products and were therefore taking unrealized losses.
For Rashwan, simplicity sells. "I'm financially quite literate and it's not always clear what I'm buying with these products. If you are buying the actual futures, then you have to handle your own margin and the collateral and worry about liquidations," he said. "It's a whole slew of things if all you want to do is just bet on the price going up or the price is going down."