Binance Futures has experienced an incredible year in 2020, as Binance is looking to consolidate its position as the leading crypto futures exchange platform in 2021. The Binance Futures launch officially began at the end of 2019, it has managed to overcome the likes of BitMEX, which dominated the crypto futures and derivatives market up until 2020.
With over 1,000 markets to choose from, Binance Futures is the one-stop service for both individual and institutional traders. The great thing about Binance is that it runs an entire ecosystem aimed at all types of traders. You need a single account to access both the derivatives platform and the spot exchange. Besides this, you can stake ERC-20 tokens, earn passive income, and mine rewards.
Binance Futures Launch in 2019
Binance Futures has expanded at an impressive pace in less than two years. While people wouldn’t necessarily associate 2020 with a successful year because of the COVID pandemic, it has been a big leap for the digital world, as many people were forced to go digital because of the lockdown measures.
People want financial independence but they experienced another major economic crisis that threatened to wipe out their savings. Governments and central banks injected huge amounts of money into the economy to stimulate a V-shaped recovery, but that doesn’t necessarily bode well for fiat currencies, which have devalued given the surging supply. Under these circumstances, institutional and retail investors turned to store of value (SOV) assets, such as Bitcoin and gold.
The Binance Futures launch has benefited from the whole situation as more people have shown interest in cryptocurrencies, with Google searches for Bitcoin surging to the highest level since the beginning of 2018.
Expansion of Binance Futures
Within less than a year since the Binance Futures launch has become the largest crypto derivatives exchange in terms of volume and open interest.
Here is the evolution of the volume figures over the year:
While there is some correlation between these volume figures and the Bitcoin price, Binance Futures overcame other leading derivatives exchanges one by one. Initially, the trading volume was under $5 billion per 24 hours, but it surged to over $30 billion by the end of the year, peaking at the end of December.
The open interest on Binance Futures increased at a similar rate last year:
Binance has already built its brand with the spot exchange that it has run since 2017. People have already trusted everything Binance, so it wasn’t that difficult to grow the client base for the futures exchange. The platform’s infrastructure remained stable and reliable in the most difficult times, such as the Black Thursday when Bitcoin crashed to about $4,000.
By August 2020, the monthly volumes on the futures platform offered by Binance exceeded OKEx thanks to the bet on altcoin futures. In September, Binance has become the largest crypto futures exchange, with over $176 billion in volume. It maintained its top position in October. As of January 2021, Binance Futures’ market share has maintained above 30% since the third quarter of last year. This is very telling of how much people trust Binance, and how much the company is improving month by month by introducing new products and services. We’ll briefly mention the most important additions a bit later.
In November, when Bitcoin got closer to the all-time high at $20,000, Binance Futures saw more than $450 billion in trading volumes, which represents a 200% increase compared to October. The surge was driven by Bitcoin futures as well as large-cap altcoins. The platform saw a new all-time high in 24-hour volume at more than $30 billion, along with a record open interest of more than $2.6 billion. The industry had never seen such figures before.
After the introduction of a new product in the second half of 2020, which is the coin-margined futures contract, Binance Futures clients can access a wide range of trading instruments. They can trade futures contracts with USDT or cryptocurrencies. Also, they can choose between multiple altcoins on top of Bitcoin, and Binance is regularly updating the list.
Binance Futures Products Launched in 2020
Today, the Binance Futures launch impact can still be seen as the jump-start continues to carry Binance as the largest and most trusted crypto futures exchange. However, this wouldn’t be possible without a long list of innovative and useful products and services launched throughout 2020. Here are some of the essential milestones achieve by the Binance Futures ecosystem:
In the first half of the year, Binance introduced Cross Collateral, which is a great feature that enables clients to collateralize their cryptocurrencies to borrow against another crypto asset. Specifically, the feature allows users to use their cryptocurrencies, such as Bitcoin, to borrow USDT at a 0% interest rate to trade futures.
Most crypto exchanges use stablecoins like USDT as a quote currency in pair with many digital coins. The problem is that users who have Bitcoin or Ethereum don’t prefer to convert them to stablecoins, as they fear missing out on a potential rally in their respective cryptocurrencies. With the Cross Collateral feature, clients who don’t want to hold USDT may collateralize their crypto holdings to be able to trade futures on Binance. In other words, they don’t need to convert their cryptos to USDT.
Also in the first quarter, Binance introduced options contracts. Initially, retail traders could bet on Bitcoin options, after which Binance added ETH, XRP, and other options contracts. The product came with built-in leverage, which can amplify potential profits while reducing downside risk.
For those unfamiliar, options contracts give holders the right but not the obligation to buy or sell an underlying asset at the strike price on a specified date. At Binance, the strike price is the last price on the futures trading platform when the options contract is placed.
During the first months, users could trade American-style options, meaning that they could be exercised at any time before the expiry date. In December 2020, Binance also launched European-style vanilla options settled in USDT, which can be exercised only at the expiration date.
Leveraged Tokens (LVT)
In the summer of last year, Binance announced the launch of its Leveraged Tokens (BLVTs), which represent a form of derivatives that enables traders to get exposure to specific cryptocurrencies without being concerned about liquidation risk. Initially, the platform provided two types of BLVTs – BTCUP and BTCDOWN. The former allows you to generate leveraged profits between 1.5 to 3x when BTC moves upwards.
Elsewhere, BTCDOWN lets you generate leveraged gains when the cryptocurrency goes down. Throughout the year, the platform added many other BLVTs, including ETHUP, ETHDOWN, ADAUP, ADADOWN, LINKUP, LINKDOWN, EOSUP, EOSDOWN, DOTUP, DOTDOWN, and more.
In June, Binance launched its coin-margined Quarterly Futures, which are promoted as the platform’s second flagship product. Unlike Binance’s perpetual contracts, which have no settlement and expiry date, the quarterly futures act as real futures contracts. It’s worth mentioning that they are coin-margined, meaning that users may trade and fund them in native cryptocurrencies rather than USDT, as in the case of perpetual contracts.
Before the launch, Binance CEO Zhao “CZ” Changpeng told Bloomberg:
“We have the perpetual futures, so we wanted to go from longer term to shorter. We have a lot of users who trade futures on other platforms with delivery futures, and they are asking us to launch delivery futures so they can trade in one place. We launch products relative to user demand.”
Besides the coin-margined Quarterly Futures, Binance launched coin-margined Perpetual Futures after several weeks. The perpetual contracts are Bitcoin-margined.
DeFi Composite Index
At the end of August 2020, Binance launched the DeFi Composite Index, which is the first composite index product for the crypto exchange. The index tracks DeFi projects and enables users to get exposure to the fastest-growing sector of the crypto space.
DeFi, which stands for Decentralized Finance, was a big trend in 2020 and it’s still making waves today. The proponents of DeFi projects envision a world with traditional financial services hosted by blockchain infrastructures. The benefits would be low fees, no frictions, easy cross-border transactions, and innovative financial products and features, such as Automated Market Makers (AMMs).
The index has about a dozen constituents, including COMP, LEND, KAVA, BAND, and LINK, among others. The product can be traded as a regular perpetual contract. At the beginning of 2021, Binance’s DeFi Index is trading at its record high.
During the same month, Binance launched the Futures Leaderboard, which represents a social networking tool that enables users to follow the positions of the best traders on Binance Futures. The feature resembles eToro’s social trading option, though it’s more interesting and sophisticated.
Advanced traders have nicknames and might share their positions.
In January 2021, Binance shared the story of a top trader who made over $700,000 in about a month. The great thing is that he shared his positions so that other traders could use his strategies and trading style to reach the same return on investment (ROI).
In the first quarter of 2020, the platform introduced 24 new USDT-margined contracts. Thus, the list of perpetual contracts rose from only three at the start of 2020 to 27.
All in all, Binance Futures provides over 160 derivative products, including 80 USDT-margined futures contracts, 40 Coin-margined futures contracts, 36 Binance Leverage Tokens, and 4 Binance Options. This is by far the most diverse range of trading instruments and markets to choose from.
This helped Binance thrive and overcome OKEx, BitMEX, and Huobi by the end of September. Two months later, Binance Futures was already ahead of competitors by a wide margin.
What to Expect for Binance Futures 2021?
Even though we can say that Binance Futures is at its peak nowadays, the platform continues to expand, as there is still much room for growth. Tesla’s intention to buy $1.5 billion in Bitcoin and accept the cryptocurrency as a payment for its electric vehicles pushed prices to new record levels, which increased demand for futures contracts as well. Binance Futures is at the epicenter of Bitcoin’s bullishness, giving traders all the necessary instruments to benefit from the rally.
The pandemic doesn’t go away, and more and more people are interested to invest in safe-haven assets like Bitcoin. They also show an increasing interest in DeFi projects, which are at their record high as well.
More institutional investors are allocating a chunk of their portfolios to Bitcoin and altcoins. This trend will continue in 2021 as well.
The crypto revolution is reaching a new level these days, as Bitcoin has managed to consolidate above $35,000 and prove that it’s an important asset that should not be ignored anymore, despite the resistance from some governments.
I wouldn’t lie if I said that Binance Futures is expanding at an exponential rate. We could notice the same phenomenon with the spot exchange and the Binance ecosystem in general.
At the beginning of February of this year, Binance launched two of its first USDT-margined Quarterly Futures. Now users can trade Bitcoin and Ethereum quarterly futures that are settled in USDT.
Binance explained in a blog post:
“Binance, the global blockchain company behind the world’s largest digital asset exchange, today introduces USDT-margined quarterly futures for Bitcoin and Ethereum. The new products add further diversification to Binance’s wide offerings to meet the rising demand for Bitcoin and other cryptocurrency products.”
Last month, Binance Futures announced the launch of another tradable index called DOTECO (Polkadot Ecosystem). The new perpetual contract is USDT-margined and tracks the tokens of the Polkadot Ecosystem. The DOTECO Compose Index can be traded with up to 20x leverage and includes a basked of Polkadot protocol tokens listed on Binance, such as Akropolis (AKRO), Dock (DOCK), Reef Finance (REEF), and Kusama (KSM).
Polkadot has been in the spotlight for a while, especially after DOT’s incredible rally that sent it to an all-time high of over $23 a few days ago. DOT is now the sixth-largest cryptocurrency by market cap, but it was on the fourth position as well. The project is promoted as a multi-chain ecosystem that enables customized side-chains to connect with multiple blockchains.
To recap, the Binance Futures launch has propelled Binance to become the largest crypto futures exchange by trading volume and open interest in less than a year and has now consolidated its position. The platform has big plans for 2021 as well, and it has already launched some new products. Both retail and institutional investors want to get exposure to Bitcoin and altcoin through various means, and Binance Futures provides a full range of solutions meant to maximize your profitability. However, you should feel confident about your potential, because the risk of losing funds is not negligible given the high volatility of cryptocurrencies.