BitMEX currently offers two types of BCH derivative products for traders. The first is in the form of a Bitcoin Cash / USD (BCH/USD) Perpetual Contract and the second is in the form of a Bitcoin Cash / Bitcoin (BCH/XBT) Futures Contract.
Currently BitMEX only accepts Bitcoin as collateral. That means margin, profit, and loss must be paid or received in Bitcoin. However, through the use of financial engineering, BitMEX can give users exposure to any underlying price using a derivative called a Quanto.
A Bitcoin Quanto BCH/USD contract has a fixed Bitcoin multiplier regardless of the USD price of BCH. This allows the trader to go long or short the BCH/USD exchange rate without ever touching BCH or USD. The trader will post margin in Bitcoin, and make or lose Bitcoin as the BCH/USD exchange rate changes.
The BCHUSD contract’s underlying price is the BCH/USD exchange rate as recorded in the .BBCH Index. The swap contract is quoted in USD. Margin and PNL are denominated in Bitcoin.
|Bitcoin Multiplier per 1 USD||0.000001 XBT|
|XBT Value||BCHUSD Price * Bitcoin Multiplier|
|USD Value||XBT Value * .BXBT Spot Price|
|BCH Value||XBT Value / .BBCHXBT Spot Price|
|Bitcoin PNL Calculation||(BCHUSD Exit Price - BCHUSD Entry Price) * Bitcoin Multiplier * # Contracts|
All margin is posted in Bitcoin, that means traders can go long or short this contract using only Bitcoin. The BCHUSD Perpetual Contract features a leverage of up to 25x. For example, to buy 25 Bitcoin worth of contracts, you will only require 1 Bitcoin of Initial Margin.
As the BCHUSD contract is perpetual, there is no settlement. Marking for Unrealised PNL and Liquidation purposes are done according to the Fair Price Marking system. Note also: since this product is a perpetual contract, funding occurs every 8 hours. Please see the Funding Section in the Perpetual Contracts Guide for information, and for the current rates please see Funding Calculation in the BCHUSD Contract Specifications.
BitMEX Derivative: BCHUSD Perpetual Swap Contracts: 100,000 Bitcoin Multiplier per 1 USD: 0.000001 XBT .BXBT Spot Price: $10,000 BCHUSD Swap Price: $250.00 .BBCHXBT Spot Price: 0.025 XBT
Jason and Chen trade the BCHUSD Perpetual Swap against each other for 100,000 contracts. Jason goes long, and Chen goes short. For each 1 USD move, the contract pays out 0.000001 XBT; this is called the Bitcoin multiplier. They agree that each side can use 25x leverage, which means they post 4% initial margin to BitMEX to initiate the trade. To calculate the Bitcoin margin, they first calculate the Bitcoin value of their BCHUSD Quanto Swap.
XBT Value = BCHUSD Price * Bitcoin Multiplier * # Contracts
25 XBT = $250.00 * 0.000001 XBT * 100,000
Initial Bitcoin Margin = 25 XBT * 4% = 1 XBT
They both like to think in BCH terms at any given BCHUSD price. On the BitMEX Position Table, they are able to view the current value of their position in BCH terms.
BCH Value = XBT Value / .BBCHXBT Spot Price
1,000 BCH = 25 XBT / 0.025 XBT
They notice that the BCH value can change either when the BCHUSD price changes, or when the .BBCHXBT spot price changes. The only fixed number in a Quanto derivative is the multiplier. The BCH and USD value will change as the BCHUSD, .BXBT, and .BBCHXBT prices change.
The BCHUSD swap price rises to $300.00, let’s compute Jason and Chen’s Bitcoin PNL.
Bitcoin PNL = (BCHUSD Exit Price – BCHUSD Entry Price) * Bitcoin Multiplier * # Contracts
Jason Bitcoin PNL = ($300.00 - $250.00) * 0.000001 XBT * +100,000 = 5 XBT Profit
Chen Bitcoin PNL = ($300.00 - $250.00) * 0.000001 XBT * -100,000 = 5 XBT Loss
Notice that the only variable that affects the PNL is the movement of the BCHUSD price. Neither the .BXBT, nor the .BBCHXBT exchange rate affect either trader’s PNL.
On BitMEX, the BCH derivative is in the form of a Futures Contract and allows traders to speculate on the future value of the Bitcoin Cash / Bitcoin (BCH/XBT) exchange rate. Traders need not have Bitcoin Cash to trade the futures contract as it only requires Bitcoin as margin.
The BCH futures’ underlying is the BCH/XBT exchange rate as recorded in the .BBCHXBT Index. The futures are quoted in Bitcoin and all margin and PNL calculations are denominated in Bitcoin.
|XBT Contract Value||Multiplier * Futures Price * 1 BCH|
|USD Contract Value||XBT Contract Value * XBTUSD|
|PnL Calculation||# Contracts * Multiplier * (Exit Price - Entry Price)|
All margin is posted in Bitcoin, that means traders can go long or short this contract using only Bitcoin. The BCH futures contracts feature a leverage of up to 20x.
For example, to buy 10 Bitcoin worth of contracts, you will only require 0.5 Bitcoin of Initial Margin.
The BCH futures contracts settle on the .BBCHXBT30M Index Price. Settlement will occur on the last Friday of the Settlement Month.
A trader wants to goes long 10 XBT of BCH futures contracts. BCHU20 (the BCH futures contract expiring in September 2020) trades at 0.025 XBT. As the leverage is 20x, the trader only needs 0.5 XBT of margin for this trade.
The trader must buy 400 contracts:
10 XBT / (0.025 XBT * 1).
A few days later, the price rises to 0.03 XBT and the trader sells all their contracts.
The trader’s profit will be:
400 * 1 * (0.03 - 0.025) = 2 XBT