Initial Futures Offering

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Futures Conract

IFO, or Initial Futures Offering, is a creation of the futures market for the coin which cannot even exist. IFO is simply a determiner of the price before the asset exists. The first-ever IFO was held on CoinFLEX exchange with Polkadot crypto coin on July 17, 2019.

Polkadot IFO[edit]

CoinFLEX, a Seychelles-based cryptocurrency derivatives exchange, launched a new product as part of a broader offering dubbed “initial future openings”. The IFO will provide exposure to token projects that are fundraised via private sales and are traded in the form of illiquid SAFTs before launching. Coinflex launched 4 futures contract including Bitcoin and Ethereum.

IFO Polkadot will be the first campaign to participate in which users will need to purchase a native token CoinFLEX. Its mainnet expected to launch by year-end, and its managing foundation is recently closing the private sale of 500,000 DOTs, at a $1.2 billion reported valuation.

CoinFlex is also preparing to launch physically delivered futures for Binance’s native token BNB, Tron’s TRX and Bitfinex’s LEO tokens.

What are futures?[edit]

Futures is a derivative financial instrument, a contract to buy or sell the underlying asset on a specific date in the future, but at the current market price. Accordingly, the subject of such a contract (underlying asset) may be stocks, bonds, commodities, currency, interest rates, inflation, etc.

Each futures contract has a specification - a document that is fixed by the exchange itself, which contains all the basic terms of this contract:

  • name;
  • ticker;
  • type of contract (settlement/delivery);
  • size (the number of units of the underlying asset per futures);
  • maturity;
  • date of delivery;
  • minimum price change (step);
  • the cost of the minimum step.

What are the benefits?[edit]

  • A trader gets access to a considerable number of instruments traded on various exchanges around the world. This provides opportunities for broader portfolio diversification.
  • Futures have high liquidity, which makes it possible to apply various strategies.
  • Reduced commission compared to the stock market.

The main advantage of a futures contract is that you do not have to pay as much money as you would have when buying (selling) the underlying asset itself. The fact is that when you make a transaction, you use warranty coverage. This is a refundable fee that the exchange charges when you open a futures contract, in other words, a certain deposit that you leave when you make a transaction, the amount of which depends on a number of factors. It is easy to calculate that the leverage, which is available during futures transactions, allows you to increase potential profits many times since the guarantee coverage is often much lower than the value of the underlying asset. But do not forget about the risks.

Futures in cryptocurrency[edit]

Despite CME and CBOE platforms, which are tightly regulated by American law, Bitcoin futures are also represented on platforms such as BitMEX, OKEx, Crypto Facilities, etc.

A feature of such exchanges is much less stringent KYC procedures and AML policy requirements. Besides, on such platforms, the entry threshold is much lower, which means that they are not only available to large investors. Also on these exchanges, you can trade with large leverage (for example, 50-fold leverage is available at Crypto Facilities).

Futures contracts can be on a variety of assets - securities, stock indexes, commodities, and cryptocurrency. In general, cryptocurrency futures are not much different from other futures contracts. They also allow you to bet on rising or decreasing prices in the future.

You can trade term contracts for cryptocurrency, not having the most cryptocurrency, but only speculating on its price. That is, in particular, transactions occur on some exchanges, focused mainly on large investors.

The emergence of cryptocurrency futures in the traditional market contributes to the mass adoption and popularization of cryptocurrencies since mainstream investors will become less skeptical about cryptocurrencies. This can stimulate demand and positively influence the price and market capitalization in the long run.

See Also on BitcoinWiki[edit]