How Does Digitex Futures Work?
Introduction to Digitex Futures
Digitex Futures Exchange (Digitex Futures) is a platform that provides cryptoassets (crypto) and traditional markets derivative futures contracts to buyers and these contracts are investment priced based on the expectation of the future value of the underlying asset.
Investors and speculators can use the Digitex Futures platform to invest and or speculate on the future value of crypto assets — Bitcoin, Ethereum, XRP, etc. and traditional markets like commodities (Gold, Crude, etc.), indices (DOW, S&P500, etc.) and stocks.
Digitex Futures will launch on 27 April 2020 with only the Bitcoin futures market. All other crypto and traditional markets will be added by the development team, SmartDec within the coming months. As such, this piece will be largely based on the crypto Bitcoin market.
Bitcoin Futures
Bitcoin futures is followed by crypto investors and the media as an indicator of market movements in the larger crypto market. Many investors use the Bitcoin futures for speculation as it tends to lead the crypto market’s major trends and is highly influenced by broad systematic factors. There are two kind of Bitcoin futures — cash-settled Bitcoin futures and Bitcoin-settled Bitcoin Futures.
The Bitcoin futures market on Digitex Futures are Bitcoin settled i.e. they are Bitcoin futures that have “physical” Bitcoin as their underlying asset. They are unlike the Bitcoin futures that are cash-settled and listed by the Chicago Mercantile Exchange (CME), Bakkts, etc. This means that a buyer must have their Bitcoin (not cash) in order to trade Bitcoin futures on Digitex Futures.
The benefit of Bitcoin settled Bitcoin futures is that each such Bitcoin futures contract represents an immediate and direct investment in the amount of Bitcoin in circulation. Bitcoin futures give investors a one-for-one exposure, whereby the movement of the underlying Bitcoin translates directly to a specific dollar value per contract.
Zero-Fee, Zero-Commission and Zero-KYC Trading
Get Alt Assets’s stories in your inbox
Join Medium for free to get updates from this writer.
Digitex Futures will be the first zero-fee and commission-free crypto exchange, if not the first in all futures market. Zero-fee, zero-commission is made possible using the DGTX ERC-223 protocol token on the Ethereum blockchain, wherein all profits, losses, margin requirements and account balances are dominated. The exchange eliminates these fees by minting very little new tokens to cover both CapEx and OpEx costs of the exchange. The amount of tokens to be minted is determined by the DGTX token holders at the beginning of each trading year. No better incentive than zero-fees, zero-commission and zero-KYC.
Native Protocol Trading Token
Digitex Futures uses a protocol token, $DGTX and all shorts and long futures contracts are executed with the native DGTX protocol token. In futures trading, the terms long and short refer to whether a trade was initiated by buying first or selling first. A long trade is initiated by purchasing with the expectation to sell at a higher price in the future and realize a profit. A short trade is initiated by selling, before buying, with the intent to repurchase the stock at a lower price and realize a profit. This means that on Digitex Futures platform all profits, losses, margin requirements and account balances are dominated in DGTX tokens.
In essence, the DGTX token is akin to the casino chips which are small discs used in lieu of currency in casinos. However, in the extant case, the DGTX tokens are in just one denomination, and the price is not fixed or tied to a stable coin.
DGTX Token Price
The fallout of the above premise is that the DGTX price is determined by the forces of demand and supply as in a free market since there is a limited number of DGTX tokens. In other words, in order to place a short and or long positions users have to purchase the DGTX tokens at the reigning market price, fixed by demand and supply. There are already hundreds of millions of tokens hoarded by DGTX hoarders since February 2018 when the reverse Dutch auction sold out in 17 minutes and a lot more would-be users are still collecting DGTX tokens in anticipation for trading.
Orders, Taking Bets and Contracts
The minimum contract on Digitex Futures whether a short or long trading bet is one unit and again, it is placed using the DGTX token. One such contract is a block of DGTX tokens equal to the amount of DGTX displayed in the contract value. This means that as liquidity on the exchange increases, so will the value of DGTX increases and less DGTX will be required to place contracts of similar value.
As of the time of writing this piece, just 136 DGTX valued at $5.95 is required as margin to place a single contract with x1 leverage. This means that the dollar value of one tick contract is $5.95. A margin balance of DGTX sufficient to cover a buyer and or seller’s potential losses must be available on account before the contract can be placed successfully.
Ladder Trading Solution
Unlike the regular crypto exchanges, on the Digitex Futures platform investors can take long and or short positions depending on their expectations for future prices. This is made possible by the native ladder trading system on Digitex Futures. This is the first ladder trading solution in the crypto space and it provides a single one-click trade submission — fast, instant trade submission.
Ladder trading system creates huge opportunities for everyone, ranging from scalpers to large institutions since it enables them to instantly hedge positions both ways in seconds and also may be used to offset downside risks, considering the high volatility of assets in this space.
Conclusion
With the zero-fee offering, zero-KYC, the ladder trading system and the protocol trading utility token, Digitex Futures Exchange will be the next frontier for scalping both in the traditional and crypto markets.
