Binance's frenzied launch of contracts is like the “Death Note”, whoever is written in it meets a tragic end?
Author: Professor Suo says
“What’s the purpose of going for contracts?”
Recently or in this year, Binance has launched a large number of contracts. I haven’t counted the number of contracts, but it’s likely already surpassed many previously leading “derivatives exchanges”.
Currently, many exchanges primarily focus on “contracts” and rarely list spot trading. The reasoning is quite similar: listing high market cap assets for spot can easily let users take the bait; listing contracts is not a concern because users can short or long with contracts.
So, in fact, including but not limited to Binance, OKX, Bybit, the number of contracts they have launched is far greater than that of spot, and the reason is here.
Moreover, the main point is that for spot trading, you may truly need “reserve spots” for users to withdraw, whereas “contracts” do not require this at all, after all, it’s not “physical delivery”.
If viewed from a very observational perspective, the exchange itself is just a place that provides “trading”, so as long as trading pairs are provided to everyone, it is inherently profitable through transaction fees. Therefore, whichever fee can make money, that’s the one to go with; whichever can increase “fee income”, just do that.
So isn’t “leverage” also “transaction fees” or income from leverage geometry?
Thus, from the perspective of an “exchange”, this is a normal operation, after all, the aim is “transaction fees”. Unless you insist that the “exchange” is eating customer losses, then there are more interpretations. You can rely entirely on everyone’s imagination, so I won’t elaborate further; it’s unnecessary.
“Why does spot have a greater impact?”
Here, it’s more about exploring a question: why does spot trading have a greater impact on exchanges or prices?
When trading spot, the trading income is “reserve spot” for users to withdraw, which results in a lot of circulation being locked in the exchange. Many users may not necessarily buy or sell these, which could lead to the actual circulation of market cap being much less than the actual market cap.
If the exchange launches spot trading, it means it definitely has spot assets, after all, before opening trading, it must ensure that there are spot assets in the exchange’s address, and these addresses are all public.
Therefore, the positive impact on prices is far greater than that of “contracts”, and the main point is that going for spot will make “liquidity” not so good. Here, “liquidity” refers to many “spot tokens” being locked in “trading searches”.
Especially when many spot tokens are monitored on-chain, and someone discovers that a certain exchange has very few token balances, they will force a short squeeze for withdrawals, making the exchange buy tokens themselves. This kind of thing has happened on $REEF, where at that time, @gate_io didn’t have enough tokens, leading to @dotyyds1234 forcing a short squeeze.
“Liquidity Competition”
In fact, the main relationship between contracts and spot lies in the debate over “liquidity”.
After going on contracts, liquidity is very good, and since there is no need to buy “spot”, the actual impact on prices is “not significant”. It’s only through later “arbitrage” movements that the impact increases. Therefore, many people will use “contracts for arbitrage”, which leads to very good “liquidity”.
Moreover, many currencies can be seen that the trading volume of spot is far lower than that of contracts.
Even because of contracts, not only can you make money when the price rises, but you can also make money when it falls, leading to even better liquidity.
Similarly, with 10,000 USDT, it might turn into 200,000 USDT in cash flow in the contract market. For the exchange itself, it’s just skimming off the top; whoever can generate more cash flow is favored.
As for spot trading, especially since current spot liquidity is not good, due to the recent market conditions, altcoins have been on a downward trend. For many exchanges, spot trading shows a large bullish line followed by a continuous decline. It’s rare for prices to continue rising on exchanges; even wealthy and influential VC coins cannot achieve this. Can purely conceptual meme coins do it?
Thus, an option is given where you can also make money when prices fall, and that can only be through contracts.
So, from the standpoint of allowing “users to make money”, there’s actually no problem with going for “contracts”.
“Final Chapter”
For those who hold a relatively large number of positions, if they go for contracts on Binance, it can provide ample opportunities to offload. However, with spot trading, it may not necessarily be possible to offload everything.
Since the depth of spot trading is not very strong and the trading volume is not large, if you purely rely on a chain to smash it, it’s quite difficult. However, if you directly open a contract, there’s a good chance you can get in.
This reminds me of $ARKM, where a certain group member held 10% of the total circulation. They couldn't offload it through spot and then opened many contracts, gradually offloading to complete the exit.
Therefore, in reality, there’s no conflict between spot and contracts; it just depends on how you use them or how you understand the concept of liquidity.
For most assets, better liquidity leads to faster declines, while worse liquidity leads to better increases.
For example, that would be assets like NFT, BRC20, etc.
Thinking about how many transaction fees there are, exchanges must want to take a piece of the pie, right? If spot isn’t listed, then contracts must be listed!
In the end, it’s all business. They cannot control prices. If they short, everyone can directly buy on-chain to explode the shorts, haha.
Good liquidity will be controlled by “market makers”.
