Bitfinex Now Has a Derivatives Contract Offering Exposure to Bitcoin Dominance

Bitfinex says the perpetual swap provides investors with a less volatile form of exposure compared to a plain-vanilla bitcoin futures contract.

May 8, 2020 at 1:00 p.m. UTC
Updated Sep 14, 2021 at 8:38 a.m. UTC

A new derivative from Bitfinex allows investors to take a position on bitcoin's overall share of the cryptocurrency market.

The Seychelles-based crypto exchange said Wednesday the BTCDOM contract would allow investors to bet on bitcoin's dominance rate – a metric for determining the market's bitcoin value versus the value of other cryptocurrencies.

The first of its kind, BTCDOM is a perpetual swap – a future without expiry date – that relies on a proprietary Bitcoin Dominance Index, comprised of seven of bitcoin's most liquid trading pairs, including those with large-cap coins, such as ether, EOS, litecoin and XRP.

Bitfinex says the contract provides investors with a less-volatile form of exposure compared to a plain-vanilla bitcoin contract because it references bitcoin to a broader basket of digital assets. That means that while the value of the contract obviously changes on the bitcoin price, it takes into consideration the broader performance of the whole asset-class, which remains highly correlated.

The BTCDOM contract, which is settled in USDT, began trading Wednesday.

Aggregated open-interest – a metric for trading activity – for bitcoin futures soared to an all-time high of over $5 billion before the pandemic triggered a mass-liquidation. As the graph below shows, open-interest has already regained much ground since "Black Thursday."

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That might be because many market participants are already trying to hedge against the possible outcomes of the upcoming halving event. Provider GSR told CoinDesk in March, just before the lockdown began, that it had seen record demand for customized options contracts from miners who wanted to lock-in a price ahead of the halving.

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