Bitcoin Perpetual Swaps Introduced on Huobi With 125x Leverage

Huobi, situated in Singapore, is the recent crypto exchange to introduce perpetual swaps. The new product is presented live on Huobi DM, the derivative trading platform for the company.

BitMex-like future no-expiry contracts, better known as perpetual swaps, are becoming increasingly prevalent amongst crypto exchange firms.

Binance and OKEx launched perpetual swaps last year and now Huobi’s time to join the bandwagon.

Huobi DM currently offers crypto-derivatives including Bitcoin futures with weekly, bi-weekly, and quarterly contract expiry dates.

The platform currently provides perpetual swaps. Such derivatives enable traders to get Bitcoin access despite not having bought it. The commodity is similar to a futures contract that imitates the spot price of the asset but it does not have a termination date or payout. Platforms usually exchange transactions amongst buyers and sellers every eight hours.

Perpetual swaps are, as per Huobi DM, “a modern derivative product that allows users to effectively hedge risk and builds leveraged investment opportunities in competitive market situations.”

Ciara Sun, VP of Global Business Department at Huobi Group, clarified:

While we have lately noticed, rapid market fluctuations may have a major but transient effect on the wider financial environment, yet uncertainty is still a very regular part of the market process. Perpetual swaps offer another method for traders to leverage on market fluctuations and build arbitrage in their portfolio.

Perpetual Swaps on Huobi Reinforced With x125 Leverage
It is also probable that Huobi is studying how some exchanges operated and from its viewpoint applied the industry standards. The derivative system, in principle, enables for a gross leverage amount of close to 125, like in the Binance example. This implies traders should raise their initial payment for a position by 125 times to optimize future earnings.

Nevertheless, the probability of losing is also much greater, hence why most analysts caution that only institutional and skilled investors should be allowed to take these instruments.

In other cases, the potential value for BitMex and OKEx is 100x. Until Binance initially disclosed its overall leverage amount, much backlash was faced.

Huobi says, though, how it provides some primary risk reduction features to mitigate risk, along with the partial liquidation procedure and circuit breaker. The former slowly reduces the role of a client, rather than liquidating it in one event in total. In irregular market conditions, the liquidation circuit breaker is used when the system identifies significant differences in liquidation and market rates.

Perpetual swaps were on our agenda for a while now, although we needed to make sure we provided adequate risk checks in place until we declared it accessible, Sun clarified.

Huobi originally mainly enables BTC swaps, but it’ll eventually offer ETH, EOS, and LTC.