Huobi to Leverage Market Volatility With New Perpetual Swaps
Huobi DM introduces Bitcoin perpetual swaps with more coins to come in the near future.
Key Takeaways
- Bitcoin perpetual swaps now available on Huobi’s derivatives trading platform.
- The swaps will be quoted in USD but margined and settled in the underlying asset.
- Multiple risk control measures implemented to help traders hedge against 125x leverage.
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Huobi DM, the derivatives trading arm of global cryptocurrency exchange Huobi, has announced the launch of perpetual swaps. In a press release shared with Crypto Briefing, the company said that the new derivative product will enable traders to better hedge risks and create leveraged arbitrage opportunities in volatile markets.
Perpetual Swaps Coming to Huobi
The derivatives trading platform of Huobi, one of the largest cryptocurrency exchanges in the world, has launched a new product.
In a press release shared with Crypto Briefing, the company announced the launch of perpetual swaps that will enable users to better hedge risk and create leveraged arbitrage opportunities.
“As we’ve recently experienced, sudden market swings can have a significant yet temporary impact on the broader financial ecosystem, but volatility itself is a very normal part of the market cycle,” said Ciara Sun, VP of Global Business of Huobi Group. “Perpetual swaps provide traders another tool in their arsenal to capitalize on market movements to create arbitrage.”
Sun said that Huobi DM will support inverse perpetual swaps, better known as coin-margined perpetual swaps. The swaps will be quoted in USD but margined and settled in a contract’s underlying digital asset.
Minimizing Risk With BTC Swaps, More Coins to Come
The platform currently supports only Bitcoin swaps, but said that most other major cryptocurrencies, including ETH, EOS, and LTC, will be added “in the near future.”
Users trading Huobi’s perpetual swaps will benefit both from flexibility in their trading strategy and the platform’s own risk control measures. As perpetual swaps trading is supported with up to 125x leverage, the platform warned users about the risks correlated with such high leverage.
To help traders better hedge those risks, the platform implemented several measures that minimize exposure and reduce the possibilities of liquidation and clawbacks.
All perpetual swaps will require users to commit an initial margin as a guarantee when opening a position. A funding mechanism then anchors each position to the spot price of the corresponding asset and settles the contract every eight hours.
Aside from that, the exchange’s new partial liquidation mechanism protects traders in the event of a huge decrease in margin ratio by gradually reducing a user’s position instead of liquidating it in full in a single event.
If, however, abnormal market conditions occur, further liquidations will be halted by a liquidation circuit breaker.
A $500,000 insurance fund for each coin has also been established by the exchange to help prevent clawbacks from negative balances and guarantee user profits.
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