The cryptocurrency futures market is rapidly growing. As investors of all sizes grow increasingly wary of the security concerns of investing in crypto assets directly, futures contracts are continuously proving to be a viable way to enter the crypto market.
So far, the spotlight has been on cryptocurrency futures platforms that operate within the US. However, cryptocurrency futures platforms are becoming increasingly popular throughout the EMEA (Europe, Middle East & Africa) region.
Recently, Finance Magnates spoke with Emmanuel Alamu, the new head of CoinFLEX's Business Development efforts for the EMEA region, to talk about his company’s strategy for establishing itself as the region’s go-to futures exchange and for connecting the trading community in the EMEA.
“CoinFLEX is a new entrant to the cryptocurrency derivatives ecosystem and will be the world's first physically delivered cryptocurrency futures exchange following our launch this month,” Alamu explained. “We are gearing up to deliver (pun intended!) on our promises.”
“I can also exclusively announce our official soft launch date is scheduled for this Friday, 5th April for API users, with full rollout for web interface traders coming later in the same month.”
Alamu said that so far, the response to CoinFLEX’ upcoming launch “has been overwhelmingly positive.”
As for his own role in the company, “I will be working effortlessly to relay any feedback we receive to our product/tech team and ensure our users based in this region have a great experience trading on our exchange,” he explained. “A key focus of mine will be to ensure the professional cryptocurrency trading community in this region, particularly London, matches the strides we have already made in Hong Kong.”
On a practical level, Alamu explained that this work can be broken down into “three main goals.” The first, “to establish the benefits of physical delivery in cryptocurrency Risk Management ,” the second, to “introduce the market to novel trading products & tools for digital asset trading,” and the third, to “foster a more connected EMEA trader community.”
Critics say that “‘physical delivery’ of a digital asset like Bitcoin is somewhat counter-intuitive”
With regards to the first goal, Alamu said that “it’s fair to say that part of the initial feedback we have received so far is that ‘physical delivery’ of a digital asset like Bitcoin is somewhat counter-intuitive,” Alamu said. “However, this is no different from settlement in traditional financial markets futures.”
Alamu explained that making this clear is “paramount” in his mind. “Physical delivery of futures contracts on digital assets requires the actual underlying digital asset to be delivered onto our exchange upon or before the specified contract delivery date.”
He added that physically delivered futures contracts greatly reduce buyers’ risk of being victimized by manipulation. “Our unique exchange offering of physical delivery means our users can hedge and speculate on cryptocurrency price movements with zero index or settlement manipulation risk.”
Because of this, “any institutional traders intend to use our offering as a more pure arbitrage mechanism between the contracts and the underlying spot markets across various exchanges and lock in profits to be realised once the futures contract expires.”
“This will provide a much-needed benefit of developing the futures curve and subsequently, increasing the legitimacy of the digital asset ecosystem by reducing volatility across the forward curve.”
Alamu also said that “[CoinFLEX] will be working to meet the commercial hedging needs of cryptocurrency mining firms; needs which have been overlooked by the derivatives space so far. Mining companies earn in Bitcoin as a result of their operations, yet they have USD and other fiat currency liabilities. With our exchange offering, these institutions will no longer be left exposed to the price volatility inherent in the nascent digital asset markets, thus, amplifying the yield on their operations from proper treasury risk management.”
A “Handful” of New Crypto Derivatives Products
Regarding “[introducing] the market to novel trading products & tools for digital asset trading,” Alamu said that “CoinFLEX already has a number of futures contracts in the pipeline.”
“Soon after launch, we will be offering Stablecoin-to-Stablecoin futures contracts with USD Coin (USDC) versus Tether (USDT) and after that, expanding to other digital assets such as Ethereum and Bitcoin Cash. Fully functioning basis contracts (Futures - Spot) and calendar spreads (Forward Contract Rolls) are in our pipeline for phase two releases.”
“Additionally, we have a handful of completely new cryptocurrency derivative products in the locker,” he added. “We will be steadily introducing these contracts into our exchange ecosystem post-launch. Select external feedback so far suggests that a number of these will make a big impact in the derivatives space.”
The EMEA Trading Community Needs More Connection
Alamu’s perspective on trading communities in other regions of the world seem to be the reason behind his desire to “foster a more connected EMEA trader community.”
“The States and Asia have seemingly taken the lead so far on building cohesive cryptocurrency communities in the trading sector whilst Europe seems to still be in the relatively early stages of development,” he told Finance Magnates.
He believes that his unique position as a connecting point between different sectors of the trading community across Europe and parts of Asia make him a conduit for networking. “I’m already in talks with world-class cryptocurrency trading firms from Amsterdam to London to Tel Aviv and I will strive to develop the community amongst them for the ultimate progress of the industry on a global standpoint.”
“The core of our initial strategy post-launch is to fully leverage our strategic partnership with Trading Technologies, a market-leading traditional futures independent software vendor that holds the accolade of being the world’s fastest commercially available futures Trading Platform ,” Alamu said, adding that “I will be utilizing their infrastructure in the region as a starting point.”
As a result of the partnership, Alamu explained that professional retail crypto traders will soon have access to “trading & algorithmic tools not currently open to retail traders in the cryptocurrency trading space.”
Sights Set on Asia
CoinFLEX is hoping that most of these professional retail traders will come from Asia. “Our company’s main target market is on the Asian retail trader market,” Alamu explained. “The fact that our headquarters and most of management are based in Hong Kong is a testament to that.”
However, CoinFLEX will be available to users in other areas of the world. “Residents of most parts of EMEA, South America & Australasia are also welcome to trade on our exchange and utilize our unique offering in the cryptocurrency futures space. At this juncture, it must be noted that we will be prohibiting American and Canadian residents from creating accounts on our exchange.”
Although CoinFLEX is incorporated in Seychelles, Alamu is not concerned that regulations in the EU or Asia will affect CoinFLEX' operations within those regions in the foreseeable future. “We are following regulatory developments across Europe with interest, with a particular focus on the FCA who have stated they are due to release official guidance this summer,” he said.
“We aim to adhere to relevant regulations and money-laundering standards as part of our robust compliance policy for those depositing or withdrawing liquid 1-to-1 USD-backed digital currencies that are referred to as ‘stablecoins’.”
More Details Will Become Clear After the Launch
As the cryptocurrency futures market continues to grow, Alamu acknowledged that there is some stiff competition within the space. “Competitors in the cryptocurrency derivatives ecosystem we see are the likes of OKex, BitMEX, CME, ErisX and Bakkt,” he said, although “our offering of physical delivery means our most direct competition is more purely from the latter two mentioned.”
However, “what differentiates us from those two companies is that they are regionally focused on the US market - that only accounts for 4% of the world population. In contrast, we are building a more global cryptocurrency derivatives exchange and we aren’t dealing with U.S. customers.”
As such, CoinFLEX hasn’t had to worry too much about competition just yet. So far, everything is shaping up nicely for the company.
“We are pleased to announce that we have recently completed our fiat funding round with two reputable venture capital firms, specifically Digital Currency Group and Polychain Capital, joining our already wide variety of stellar institutional trading partners in our investor consortium,” Alamu said.
Alamu also said that more details about CoinFLEX’ offerings will become clear after the company’s official launch. “If you want to get the latest on CoinFLEX, feel free to sign up to our mailing list here. Join our Telegram group here to ask questions directly to myself & our company management, partake in the discussions with others in the CoinFLEX community, and stay posted on our future events.”
