CoinFlex- crypto futures exchange, headquartered in Hong Kong has secured $10 million in a funding round that was closed in the previous week. CoinFlex managed to receive financial funding from various blockchain investor, among them are Polychain Capital, chairman of Bitcoin.com Roger Ver, Divergence Digital Currency and NGC Ventures.
CoinFlex Company apparently alleges that it is one of the world’s first crypto exchanges to provide physical delivery for Bitcoin futures contracts; further, the exchange seeks to increase its business from Asian retail traders who seeks to prevent becoming a victim to price manipulation that it believes is essential for cash repayment contracts.
CEO of CoinFlex, Mark Lamb mentioned while speaking to the South China Morning Post that bitcoin futures market requires physical settlement because of price manipulation.
Key blockchain investors such as Digital Group and Polychain Capital joined the investment consortium of CoinFlex in March, this year.
Further Lamb said, contracts that deliver bitcoin and other tokens physically in the settlement will profit investors, who can be confident that the spot and futures cost have not been manipulated and they can carefully monitor the spot bitcoin value. This is due to cash settlement contracts, whose value is regularly calculated through a formula based upon the spot bitcoin value of other crypto exchanges, can be changed easily.
Professional and retail traders alike are affected by price manipulation in the cash-settled futures market. In physically delivered contracts, anyone long at expiry receives the underlying bitcoin. There are no formulas involved.
He mentions professional traders are taking benefits of the low bitcoin spot amount against futures. Physical settlements will help mitigate manipulation.
Lamb addressed SCMP that settling instantly in bitcoin reduces the possibility of price manipulation. CoinFlex is targeting at BitMEX-next-generation cryptocurrency trading platform that trades bitcoin futures contracts. The daily volume of bitcoin futures contacts BitMEX trades is $2.86.
When Lamb was asked if CoinFlex will offer services to Hong Kong citizens, he refused to respond. Hong Kong’s Securities and Future Commission drafted a cryptocurrency regulatory framework on crypto exchanges in November, last year. The agency has mentioned that it was not able to offer licenses to crypto exchanges that provided services like the futures trading and derivative contracts.
Later, CoinFlex CEO mentioned he noticed price manipulation efforts have been growing since the previous few months. Investors have been manipulating spot values to take advantage of the fact that the trading size of the cryptocurrency futures market is 1.5 times bigger than the cryptocurrency spot trading market.
Around 23 employees currently serve CoinFlex crypto exchange firm, and it had introduced its trading platform in February 2019. CoinFlex CEO was not afraid of its objective to defeat BitMEX. BitMEX has stopped Hong Kong customers from using its services due to a high regulatory examination of crypto exchange providers across the world.
OKEx’s financial market director, Lennix Lai, mentioned an important disadvantage of physical settlement was if compared with cash settlement, it was highly expensive. The physical settlement includes additional fees, for instance bitcoin transaction charge.
For most users, they do not want to physically settle their futures because it means dealing with fiat currencies and having the total bitcoin in hand. [This contrasts with] oil futures trading, whereby physical settlement is a suitable use case, as traders need the actual oil for the settlement. But for cryptocurrency, it is not necessary.
Trading’s global head of Kenetic Capital, Benjamin Roth accepted physical settlement was less vulnerable to price manipulation, and he had not observed price manipulation proofs within the cash settlement market.