Crypto Valley Exchange (CVEX) stands out for its distinctive approach in the dynamic world of cryptocurrency trading. Contrary to the common trend, CVEX does not focus on perpetual contracts but instead emphasises the integration of expirable futures and options into its trading platform. This strategic decision stems from an in-depth understanding of perpetual contracts’ inherent limitations.
Perpetual contracts, while popular in the crypto space, have notable disadvantages. They are often inefficient in capital utilisation, limiting their effectiveness in diverse trading strategies, particularly in hedging. This inefficiency is a barrier to the growth of a robust options market, as these contracts lack the necessary flexibility for various hedging tactics, including delta hedging.
Significant design issues and market risks overshadow the ease of implementing perpetual contracts within DeFi frameworks. Many protocols depend on failed trades to fund lending pools, a system that inherently favors retail failures over successes. This leads to skewed market risks and undermines the long-term value of these products for hedging. Additionally, the risk management models often result in imbalanced market conditions, posing risks for long-term hedges and potentially leading to market instability.
Recognising these challenges, CVEX has prioritised futures contracts and options in its offerings. These instruments are launched monthly and have a three-month lifespan, ensuring the availability of three active futures at any given time. This approach aligns with the platform’s commitment to providing diverse trading options, catering to different strategies and risk profiles.
Futures contracts on CVEX are meticulously designed to provide an edge to liquidity providers, with the bid-offer spread tailored to enable profitability. The final settlement of these contracts occurs on the last Friday of the expiry month, with a settlement fee designed to incentivise the closing of positions before the final settlement. This strategy reduces system load at settlement and minimises overall risk.
Options contracts on CVEX complement the futures schedule, offering a range of strike prices based on anticipated contract volatility. This structured approach allows traders to engage in various strategies, leveraging the dynamic nature of both futures and options markets.
CVEX’s commitment to not being a perpetuals DEX is a bold step toward more efficient and risk-managed crypto trading. By focusing on expirable futures and options, CVEX sets new standards for fusing traditional finance principles with decentralized finance innovation. This approach is about providing trading options and ensuring stability, efficiency, and risk management in the crypto trading landscape. Join us at CVEX as we redefine the future of cryptocurrency trading, where the focus is on sustainable growth and comprehensive risk management.
