As the volume of Bitcoin (BTC) derivatives trading continues to rise, the cryptocurrency industry keeps tapping more crypto markets, like stablecoin Tether (USDT), for futures trading.
KuMEX, a derivatives arm of IDG-backed crypto exchange, KuCoin, is planning to roll out USDT-margined Bitcoin perpetual contracts on March 30, 2020, the firm officially announced on March 27.
KuMEX currently supports only Bitcoin and USDT
While the new type of futures contract will be launched next week, KuMEX users are already able to deposit USDT via the web or public API starting from March 26, the company said. KuMEX offers crypto derivatives trading up to 100x leverage, according to the announcement.
KuCoin told Cointelegraph that Tether will become the second cryptocurrency supported on KuMEX after Bitcoin. In the near future, the firm also plans to support other major cryptocurrencies like Ether (ETH), XRP, Bitcoin Cash (BCH) and Bitcoin SV (BSV) for trading on KuMEX.
What are perpetual contracts in crypto?
By definition, a perpetual contract is a special type of a futures contract — an agreement to buy or sell a crypto asset on a specific future date at a specific price. Unlike the traditional form of futures, a perpetual contract does not have an expiry date while its trading is based on an underlying index price. The index price includes the average price of an asset in line with major spot markets and their relative trading volume.
As such, KuMEX’s BTC/USDT spot index will consist of the volume-weighted average price of BTC/USDT across six major cryptocurrency exchanges, including Binance, OKEx and Huobi. The trading volume will be adjusted on a quarterly basis, KuCoin added.
Average daily trading volume on KuMEX hits about $100 million
Johnny Lyu, the newly appointed CEO at KuCoin Global, outlined that the USDT perpetual contracts will be “clearer and easier for new futures traders to make investment decisions using USDT.” He states that the contracts will also mitigate the volatility brought by non-pegged tokens.
Additionally, the KuCoin team emphasized to Cointelegraph that KuMEX decided to choose USDT as the first stablecoin supported on the platform because the coin is “far more stable” than other coins like Circle's USDC or Paxos’ PAX in terms of market capitalization, liquidity and user recognition.
The introduction of USDT perpetual contracts on KuMEX comes as the average daily trading volume of the derivatives platform hit about $100 million, a KuCoin spokesperson told Cointelegraph.
Following the trend of the overall growth of crypto derivatives trading, perpetual contracts trading on crypto markets are becoming increasingly popular. As such, Binance, one of the world’s biggest crypto exchanges by daily trading volume, reported a significant surge in trading volumes across the exchange’s futures perpetual contracts for January 2020. According to the report, the BTC/USDT perpetual contract was the most popular contract in January, recording nearly a 30% return.