Exchanges are crazy about online contracts: the interests behind them, the impact on spot prices and the liquidity game

Author: Professor Suo said

"What is the picture in the contract?"

Binance has launched a large number of contracts this year. I have not calculated the number of contracts, but it has probably surpassed many of the leading "derivatives exchanges".

Nowadays, many exchanges actually only offer "contracts" and rarely offer spot products. The reasons are basically the same. If the market value is too high, it is easy for users to take orders. If the market value is too high, it is easier for users to take orders. But there is no need to worry about adding contracts, because users can do both short and long positions.

Therefore, in fact, including but not limited to Binance, OKX, and Bybit, the number of online contracts is much larger than that of spot. The reason is also here.

And the most important thing is that for spot, you may really need to "reserve spot" for users to use for withdrawal needs, but "contract" is not needed at all. After all, it is not "physical delivery".

If you stand on the sidelines, the exchange itself is a place that provides "transactions", so it only needs to provide everyone with trading pairs, and it is the handling fee earned, so whichever handling fee can make money, whichever one can make money. Increase "fee income" and do it.

So "leverage" is not just a "handling fee" but also an income from leverage?

So in fact, from the perspective of the "exchange", this is a normal operation. After all, the figure is the "transaction fee". Unless you insist that the "exchange" loses money by eating customers, then there are more explanations. You can just rely on everyone's imagination to think about it, I won't say it, there is no need.

What is the reason for the greater impact of spot goods?

This is actually more like exploring a question: why spot prices have a greater impact on exchanges or prices.

If you trade spot, the exchange will "reserve spot" for users to withdraw and trade, so a lot of circulation will be locked in the exchange, and many users will not necessarily buy or sell them, which will actually lead to the possibility that the circulation will be There are much fewer MCs on the market than there are actually.

If the exchange lists spot, it means that it will definitely have spot. After all, before starting a transaction, it must first ensure that there is spot on the exchange address, and these addresses are all listed.

Therefore, the positive effect on the price is far greater than that of the "contract", and the most important thing is that adding spot will make the "liquidity" not so good. The "liquidity" here refers to the fact that many "spot tokens" are locked In "Transaction Search".

Especially when there are many spot tokens, and someone discovers through on-chain monitoring that the token balance of an exchange is very small, they will withdraw cash through a short squeeze and let the exchange buy the tokens themselves. This happened to $REEF . At that time @ There are not enough coins in gate_io , so @dotyyds1234 forced a short squeeze for a while😂.

The battle for liquidity

In fact, the main relationship between contracts and spots lies in the "liquidity" debate.

After adding the contract, the liquidity is very good, and since there is no need to buy "spot", the impact on the price is actually "little". It only becomes larger through the "arbitrage" trend in the later period, so many people will use the "contract" to Arbitrage", which results in "liquidity" being very good.

And for many currencies, you can find that the spot trading volume is far lower than the contract trading volume.

Even because of the contract, you can make money not only when it rises, but also when it falls, which leads to better liquidity.

The same 10,000u may turn into 200,000u capital flow in the contract market, which is a draw for the exchange itself. Whoever can make more money will like it.

As for spot prices, especially at the moment, the liquidity of spot prices is not good. Because of the recent market situation, the counterfeit prices have been going downwards. For many exchanges, the spot price is a big positive line and then continues to fall. If you want to go to the exchange, it will continue to rise. Not even the rich and powerful VC coins can do it. Can a meme that relies purely on concepts do it?

Therefore, there is an option to make money even if the price drops, and it can only be a contract.

So in fact, from the starting point of allowing "users to make money", there is actually no problem in signing up for a "contract".

Final chapter

In fact, for those who hold a large number of positions, if they sign up for Binance’s contract, they can be given ample opportunity to ship.

Because the depth of the spot itself is not very strong and the trading volume is not large, it is quite difficult if you just rely on the chain to hit it. If you open the contract directly, there is a high probability that you can get it in.

Reminds me of $ARKM . A certain group of friends started by holding 10% of the total circulation. They couldn't sell it out by relying on spot trading. Then they opened the full contract themselves, and then sold it step by step, and directly completed the shipment.

So in fact, there is no conflict between spot and contract. It just depends on how you use it, or how you understand liquidity.

For most assets, the better the liquidity, the faster they will fall; the worse the liquidity, the better they will rise.

Examples include assets such as NFT and BRC20 .

Think about it, with so many handling fees, the exchange always wants a piece of the pie. If the spot price is not available, the contract must be listed, right?

After all, it’s all business. People can’t control the price. People are short selling, but everyone can buy it directly on the chain and sell it short.

If there is good liquidity, it will be controlled by "market makers".