What is CRUDE.BTX?
CRUDE.BTX is an asset that represents 1.5x (half bull/half bear) the price of Bitshares on the DEX. It is essentially a decentralised futures traded smartcoin on the DEX which can only be gotten by opening a margin above 1.5 with Leverage (CRUDE.LVRG) as collateral.
Why Futures Trading?
Futures trading is currently a lucrative means of getting rich in the cryptocurrency market and having a futures traded token on the DEX brings the opportunity closer to the bitshares ecosystem.
How do I benefit?
CRUDE.BTX as earlier said is a futures traded token, whose unique value comes from its supply and the value of its underlying asset CRUDE.LVRG against Bitshares. ( As a rule of thumb, its true value K = 1.5BTS (K is constant). However its notional value (spot price) can change based on other factors in order to benefit those who wish to trade the asset. These factors include the spot price of bitshares, the spot price of Leverage, number of days to expiration of contract, market volatility and market fees from trading the assets(Both Leverage and BTX). Currently all operations from a contract wallet called crude.btx-account which aims to buy up as much of the CRUDE.BTX token it can buy at notional value quarterly. Each bid the wallet makes ends after every Quarter after which a new bid is set at the notional value of that day. Thus the wallet aims to reduce the supply of CRUDE.BTX on the market in the hope of increasing the notional value above 1.5BTS, the perceived price with which it was borrowed.
As a trader you can benefit from this by either borrowing the asset into existence and selling it on the market for bitshares (Opening a Short Position) or bidding for CRUDE.BTX tokens on the market in the hope of gaining more bitshares in the future (Opening a Long Position) when its notional value has increased.
CRUDE.BTX/BTS MARKET This is the market of interest where the futures trading really happens, traders may constantly buy and sell the asset daily, but the major trades will happen on the 20th of each quarter where the BTX supply is bought at notional value. The other market traders can buy from is the CRUDE.LVRG market.
What Happens to the CRUDE.BTX that is bought by the contract wallet?
What happens is that the account would immediately ask for settlement and the resulting collateral burnt. This helps to control the supply of both tokens.
How can I be Sure of Profit?
The purpose of trading a futures market is to make big profits at low risks, all futures contracts are tailored according to the risk free return of the US treasury Bond matching the investment duration of the stock or asset. If the returns are lower than that of the Bond such asset would have no value for investment. CRUDE.BTX uses the spot price model of bitcoin futures to calculate its possible returns in price, however the interest rate used is slightly different from that of bitcoin, in that it factors in the notional value of the asset in terms of its supply and the income generated by the asset from trading, thus it varies whereas that of bitcoin is set to 1.
What is the Interest Rate for borrowing the asset?
The interest rate is dynamic and is calculated as follows:
Interest rate = ((Market Income + wallet Balance)/4)/CRUDE.BTX total supply)
The market income is calculated from the amount of CRUDE.LVRG or CRUDE.BTX available to claim as market fees, while the wallet balance is the equivalent amount of excess CRUDE.BTX tokens in BTS that can be bought from the market. Both are divided by 4 (an initial interest of 25% on any income generated) after which the result is divided by the current total supply of CRUDE.BTX. If the interest rate is equal to or above 2.5, the asset is profitable for shorts (borrowers), Below 2.5 is profitable for buyers (longs).
How do you get the notional value quarterly?
The Spot price or notional value to be used is calculated as follows;
Spot Price = ([1 + (Interest rate * (N/365))] + PP)/2
N = Number of days left before contract expiration
PP = Previous quarter price.
Currently the interest rate is very low (below 2.5), which means that it is more profitable to buy the asset directly from the market, similar to opening a long position on your bitshares tokens with future knowledge that it will be worth more than 1.5BTS soon. On the other side borrowers will be very reluctant to sell below 1.5 because they will be at risk of losing their margins in the future if they do….