Popular cryptocurrency exchange KuCoin has recently announced the launch of a crypto derivatives trading platform— KuMEX.
Reportedly, the platform is in public beta. Importantly the first offering will be a bitcoin perpetual contract (XBTUSDM), quoted in U.S. dollars, with up to 20x leverage.
The new platform is reportedly using a bitcoin spot index providing a volume-weighted average of the U.S. dollar price of bitcoin across six exchanges: Coinbase Pro, Bitstamp, Kraken, Gemini, Liquid and Bittrex.
The exchange further explained that the spot index is designed to avoid a contract being liquidated mainly “because of the low liquidity of the trading platform or the large price fluctuations of one or two spot exchanges, ”.
In order to offer some protection from risk, KuMEX is insured. According to the official announcement, “this fund ensures that investors who are forced to close their positions will not lose money that exceeds their position margin, ” The balance of the fund will be announced at the end of every trading day.
In a case whereby the insurance fund is not enough to cover losses, KuMEX also has an “auto-deleveraging” system, said to be less “inflexible” than settlement via more standard socialised loss mechanisms.
Lower Investment Threshold
In its bid to attract new retail investors to the platform, KuMEX will offer a lower investment threshold compared to the popular options.
“The XBTUSDM contract value is 1 USD, which enables traders to make a more flexible investment. At the same time, KuMEX offers a negative fee for Makers at a rate of -0.025% with a certain amount of fixed commission, encouraging users to provide liquidity to the platform through making the market and earning some commission as an incentive,” KuCoin explained
KuCoin CEO Michael Gan also said:
“Compared to the spot market, derivatives are much riskier due to the leverage used, so we are more cautious in providing such services. KuMEX is a derivative trading platform independently developed by our team, and from its inception, we have positioned it as a genuine and advanced financial product, so that all users can trust the platform and trade on it freely, without worrying about the loss caused by any form of manipulation. ”
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