We tried Binance Future. A look on the new Binance product

Last week, Binance, the world's largest trade volume exchange announced two test platforms for trading futures called Futures A and Futures B, inviting users to win up to 10,000 Binance (BNB) coins in a commercial competition. Today, September 13, Binance Future is officially launched for its entire user base with discounts of up to 50% on trading rates during the first 3 months of transactions.

With the help of the Binance Angels, Cointelegraph had access to the platform a few days before its official launch. After a couple of operations we managed to obtain some important observations and data that may be on the way to this new Binance product.

Solid Perpetual Futures

To get into context, futures are nothing more than a form of commerce where people negotiate the value of a future asset without actually acquiring the asset, that is, we can negotiate futures contracts that represent the value in BTC without the need of buying BTC. In perpetual futures, unlike traditional futures, there is no expiration date, so traders can hold a position for as long as they see fit. They are to some extent a less rigid and more dynamic commercial product than traditional futures, much like those currently offered by Bitmex.

The Bitcoin trade in Binance Futures will be linked to the BTC / USDT pair so the price in Binance Future and Binance Exchange are not dispersed, however they may vary to some extent depending on market movements. These contracts will have the minimum value of 1 USD, similar to those offered on other platforms. Something quite interesting is that both the value of the guarantee to open the contracts and the liquidation of these are made in USDT, unlike other companies where the guarantee and the liquidation are made in BTC.

This new type of contract could be very useful at a time when the price of Bitcoin is at a downward trend, since it is at that point where operators will have to negotiate as a guarantee a depreciated asset, as well as its benefits. Binance Future eliminates that problem for traders negotiating their products with Tether, the stable currency has excellent liquidity and very short transaction times, so sending from or to USDT is quite fast and economical.

Another relevant aspect in the future BTC / USDT is the robustness of its index, it should be remembered that BTC / USDT is a price group of the main spot market exchanges weighted by their relative volume. Among them are Bitfinex, Binance, Huobi, OKEx, Bittrex, HitBTC. The constitution of the index is vital for the good development of the price of the derived product, an average index of exchanges with low volume could be subject to acts of manipulation by operators which in turn would affect the setting of the price of the index.

However, there are additional protections specified by Binance Futures to prevent the manipulation of any exchange from affecting the BTC / USDT index, one of the most important establishes that if the deviation of the average price of an exchange reaches 5% compared to the others , the weighted weight of said exchange is zero, also if an exchange has no updates for 10 seconds, the weight of this exchange will be zero when calculating the weighted average.

Just like another one in the Binance industry has secure funds, these funds are designed to use the fees of customers who are not bankrupt to cover losses when other clients' accounts have a value less than 0, meaning that this system limits counterpart settlement cases

To take it to a more real level, if the price of an asset starts to fall and the system cannot close the entire order at the time the client's funds reached 0, the insurance fund covers the losses generated by that misfortune without sacrificing the benefits of the winning stores.

Read on: Binance's quarterly BNB burning would include Binance futures tokens

Small but safe leverage

Binance allows leveraged trading of up to 20x thanks to a risk engine and a fairly sophisticated settlement model. Although a margin of 20 is high for cryptographic operations, it is still below products such as Bitfinex and Bitmex that offer margins of up to 100x. I deduce that this leverage a little smaller than its counterparts comes as a measure of consumer protection under the users who are beginning to familiarize themselves with the platform. It should be borne in mind that Binance users are mostly retail merchants, so some of these cases may have an unclear idea about the risks of leveraging in business operations.

For what they are not familiar with, the leverage allows the trader to enter larger positions by borrowing from the exchange, although the benefits are multiplied depending on the amount borrowed, also the losses are generated by a greater risk to the operation. In short, if we have a guarantee deposit of 1000 USDT we can obtain a leverage of up to 20,000 USDT in BTC for negotiation. This number usually changes depending on the size of the position: the higher the position, the lower the leverage allowed.

Financing rate: key data

The financing rate is essentially used to force price convergence between the perpetual futures market and the real underlying product: in this case, BTC expressing USDT. Funding occurs every 8 hours x number of times (in the guide to future contracts I could not observe the interval of hours of the cycle). Merchants are only responsible for financing payments in any direction (long or short) if they have open positions during financing times otherwise they will not be responsible for any fees.

There are two points of great difference in Binance's futures contracts compared to its competition:

The first is that all financing calculations include leverage. Then with a maximum leverage of 20-1, the amount of your financing (either positive or negative) could be 20 times the amount of your guarantee which does not happen on other platforms where the amount of financing is of the notional value. In that same sense if the rate is positive, the long ones pay short, and if they are negative, the short ones pay long.

The second key aspect is that in Binance Future the interest rate (one of the components that determines the financing rate) is flat, something that in other perpetual futures platforms is usually variable which makes it difficult for operators to calculate.

Binance Future will make you feel at home

Something quite noticeable in Binance is the similarity of its trading interface in its different products. If you look carefully at the Binance spot platform, Binance margin and now Binance Future has maintained a simplistic design across all its interfaces. This with the intention that users can navigate a sea of ​​options without the need to be learning from scratch the operation on the new platforms. If in previous times you have used Binance Exchange you will feel at home when you experiment with Binance Future.

Another splendid aspect on the platform is the information bar at the top of the page (image below) on it you can find the most relevant information of the day such as price variations in the last 24 hours, volume, market price and the current price of the BTC / USDT pair. But among that amount of data the one that was most curious is that of the “Funding” indicator. On other platforms, this data is usually isolated and sometimes difficult to capture with the naked eye, Binance modified that status by showing the financing rate and the remaining time before the 8-hour cycle ends in the main menu bar, something that It will certainly be quite useful for daily operators.

As for the operation it seemed quite simple, funding the account is very simple from the section that says "transfer" you can send your USDT from your Binance Exchange account to your Binance Future account and vice versa all this immediately. Both the Limit Order and the Market Order have execution times are fluid and truly fast. As the platform is in the trial period, the execution time can be somewhat faster, it is necessary to wait how the platform and the order router act when there are price spikes and where the system is usually more saturated by merchants.

Once you have executed the order, the trade data will appear with the basic information such as the size of the order (including leverage), entry price, market price, settlement price and your profit / loss in USDT. A very innovative tool is the "Liquidation Board", it shows the risk of liquidation, when it is green the risk is practically null and when it is in red it is that you are close to being liquidated. The panel also shows the margin ratio, wallet balance, profit or loss, net balance (after profit or loss) and maintenance costs. The way in which the leverage is placed is somewhat poor, in many other platforms the selection of the leverage is made through a bar that tells the trader the amount of leverage he is adding in a position, in Binance Future that option does not exist because It is a bit more complicated to determine the amount of margin you want to apply to an operation.

Keep reading: Binance.US will open user registration next week

Conclusions

In general terms, the Binance futures platform offers a fairly solid product for crypto futures negotiations. The terms of the contract are very similar to those currently offered in the industry with the exception of the settlement in USDT something that seems to me that in bear markets will have a high degree of utility. In the same way, the structuring of the BTCUSDT index looks quite robust with a combination of some of the exchanges with the highest commercial volume in the world, which hinders acts of market manipulation and unnecessary liquidations.

As for the interface and the operability, the platform itself seems to be quite pleasant the Darkmode or preset dark mode makes it visually attractive for night operations, transfers between funds are very simple and the execution of the orders would dare to say that it is better that many of those currently offered. While some changes are missing such as a leverage bar that facilitates the implementation of margin or a calculator that establishes a preview of the order, these are not problems that Binance cannot solve. In general terms, Binance Future has the great potential to become a leading futures platform with great tools and the advantage of having high volumes product of its sister platforms such as Binance Exchange.