FTX derivatives exchange launched early 2019 with more than $400 million worth of daily trading volume, has recently announced plans for a new product: the BVOL tokens, which will be available to non-U.S. users.
The new tokens are ERC20-based tokens that attempt to track the volatility of the crypto markets through exposure to the FTX MOVE contracts that represent the absolute value of the amount Bitcoin (BTC) moves over daily, weekly and quarterly periods. The new tokens aim to become the VIX (stands for the volatility index) version of the cryptocurrency markets.
BVOL stands as an innovation because of the decentralized nature of having volatility captured in an Ethereum-based ERC20 token. The token offers self-custody as a feature. It simplifies the process of having to manage collateral, margin, liquidation prices because it acts as a standard ERC20 token on the spot market. One can also send BVOL tokens to other platforms that might list them.
Currently, one can buy or sell BVOL tokens on the spot market of FTX and other margin exchanges, send them directly to the wallet page using the ‘CONVERT’ function or create or redeem them on the tokens page of FTX.
Leveraged Tokens Not Yet Mainstream
Sam Bankman-Fried leads the company, also the founder of Alameda Research and a former trader on Jane Street Capital’s international ETF desk. The company has gained traction in its ability to avoid some of the public challenges that BitMEX has recently faced.
The FTX leveraged tokens are currently listed on various partner exchanges, according to CoinMarketcap. However, after Binance announced its strategic investment into FTX in December 2019, the FTX Leveraged tokens saw a listing and subsequent delisting of their tokens in March 2020.
Changpeng Zhao (CZ), the CEO of Binance, explained that the main reason for the delisting was that many users did not understand leveraged tokens, and he sought to protect users in delisting the FTX tokens.
The demand for leveraged tokens on the broader market is still unproven, with FTX’s most popular contract currently being ‘3X Short Ethereum Token’ (ETHBEAR) trading at around $1.6 million daily volume with most of the liquidity coming from MXC.