Author: Professor Suo
‘What is the point of engaging in futures?’
Recently, or rather in the past year, Binance has launched a large number of futures. I haven't counted the number of contracts, but it's likely that it has surpassed many previously top 'derivatives exchanges.'
Now many exchanges are actually focusing on 'futures' and rarely listing spot trading. The reasons are generally the same: spot trading with a high market cap makes it easy for users to take over, while futures are not a concern since users can short or long.
Thus, exchanges including but not limited to Binance, OKX, Bybit have launched many more futures than spot trading, and the reasoning is right here.
Moreover, the main point is that for spot trading, you might really need to 'reserve spot assets' for users to withdraw, but for 'futures,' there's no need at all since it's not 'physical delivery.'
If you look from a very observational angle, exchanges are basically places that provide 'trading,' so as long as they provide trading pairs, they earn trading fees. Therefore, whichever trading fee can make a profit, they will engage in it; whichever can increase 'fee income,' they will do it.
So isn't 'leveraging' a source of income from 'trading fees' as well?
So from the perspective of an 'exchange,' this is actually a normal operation. After all, what we are looking at is 'trading fees.' Unless you insist that the 'exchange' is taking customer losses, then there are more discussions to be had, and it can completely rely on everyone's imagination. I won't say more; there's no need.
‘Why does spot trading have a greater impact?’
Here, it seems more like exploring a question: why does spot trading have a greater impact on the exchange or on prices?
When trading spot assets, the trading results are 'reserved spot assets' for users to withdraw, which causes a lot of circulation to be locked in exchanges, and many users may not necessarily buy or sell them, which may lead to the actual circulating market cap being much lower than the actual market cap.
If an exchange lists spot trading, it means that it definitely has spot assets itself. After all, before opening trading, it must ensure that there are spot assets in the exchange's address, and these addresses should be clear.
Thus, the positive impact on prices is far greater than that of 'futures,' and mainly, listing spot trading will make 'liquidity' not so good. Here, 'liquidity' refers to the fact that many 'spot tokens' have been locked in 'trading searches.'
Especially when many spot tokens have someone monitoring on-chain and discovering that a certain exchange has very little token balance, they will force a withdrawal, making the exchange buy the tokens themselves. Such occurrences have happened with $REEF, where the tokens in @gate_io were insufficient, leading @dotyyds1234 to force the buyout for quite a while 😂.
‘The Battle for Liquidity’
In fact, the main relationship between futures and spot trading is the debate over 'liquidity.'
After engaging in futures, liquidity is very good, and since there’s no need to buy ‘spot assets,’ the actual impact on prices is 'not significant.' It’s primarily through later 'arbitrage' trends that it becomes significant, so many people will use 'futures for arbitrage,' leading to very good 'liquidity.'
Moreover, many coins can be found to have spot trading volumes far lower than futures trading volumes.
Even because of futures, not only can one make money when prices rise, but also when they fall, leading to even better liquidity.
Similarly, with 10,000 USD, in the futures market it might turn into a cash flow of 200,000 USD. For the exchange itself, it's about collecting fees; whoever can generate more cash flow is favored.
And spot trading, especially given the poor liquidity of current spot markets due to recent market conditions, has seen altcoins decline. For many exchanges, spot trading is a large bullish candle followed by a continuous decline. It's rare for them to continue rising after listing on the exchange; even rich and powerful VC coins can't achieve that. Can purely conceptual meme coins do it?
So the option is given that you can make money even when prices fall, which can only be through futures.
So, actually, starting from the point of 'allowing users to make money,' there’s actually nothing wrong with engaging in 'futures.'
‘Final Chapter’
For those who hold a lot of positions, if they engage in Binance's futures, it can provide ample opportunity to exit. However, for spot, it may not be possible to exit completely.
Because the depth of spot trading itself is not very strong, and the trading volume is not large, if you purely rely on a single chain transaction, it’s quite difficult. If you directly open futures, it’s likely that you can enter with a single action.
This reminds me of $ARKM, where a certain group member held at least 10% of the total circulation. They couldn't sell with spot, then opened many futures, and gradually sold off, directly completing the exit.
So in fact, there is no conflict between spot and futures; it just depends on how you use them or how you understand the concept of liquidity.
For most types of assets, the better the liquidity, the faster they fall; the worse the liquidity, the better they rise.
For example, assets like NFT, BRC20, etc.
Think about all those trading fees; exchanges must want a piece of the pie, right? If spot isn't listed, futures must be listed, right?
Ultimately, it’s all business; they can't control prices. They short, and everyone can directly buy on-chain to trigger a short squeeze 😂.
Good liquidity will always be controlled by 'market makers.'
