When I was in my early 20s, I was drawn to the world of finance. I was a heavy rock musician and a DJ. The (little) money I earned went to small orders to buy shares in local companies. I remember the advice of a guru from those years, who told me something like “the futures and options market is for very sophisticated traders, it is not for amateur traders like you; you are going to lose a lot of money, you have to be very aware of the market permanently, and, furthermore, you have to know a lot about how events and expectations are intertwined, and that’s for professionals ”. Knowing that my favorite sport is boxing and that I was already a boxer, he added “continue with your tough boxing in the stock market, and leave the options market to more sophisticated martial arts fighters.”
I make this small clarification, because Bityard, the platform that we are dealing with in this post, is a platform for trading futures and options. It is not a platform to buy BTC, ETH or any of the listed cryptocurrencies, but rather a platform to buy “contracts” on those currencies, which makes a tool like this a very attractive space in the cryptocurrency world.
To understand what this operation is about, I divided this work into three sections: first, a theoretical narrative about contracts; second, the description of the Bityard solution, and thirdly, I show an experiment that I did on the platform, using the “demo” feature.
Bityard was launched in November 2019 with the aim of making cryptocurrency options contract trading “easy”. Through these contracts, investors can operate on the movement of cryptocurrency prices, without having the need to have them in their wallets. Both buyers and sellers can benefit from the risk minimization and hedge options market, speculate on assets, and hedge against future price volatility.
There are several types of “contracts” that make up the market for “financial derivatives” that can be traded in the markets.
Options and futures are frequently present in our daily lives in an intuitive way. For example, when we agree on a deferred price in the purchase and sale of a property, or in the subscription of insurance for a car. But when it comes to options and futures in the financial markets, it seems very far from the real life.
Financial derivatives are instruments whose value derives from the evolution of the prices of other assets, called underlying assets. The underlying used can be very varied: stocks, baskets of stocks, currencies, interest rates, stock indices, raw materials, commodities, cryptocurrencies, and other more sophisticated products such as inflation and credit risks. The important issue in this type of operation is the way in which the price is derived and the nature of the transaction to which the instrument gives rise. That is, how and when the asset is exchanged for its value or price. In a spot or cash operation, such as the purchase of one kg of potatoes, the product is exchanged for its price at the time of the agreement. But a financial derivative is a “deal” whose terms are set today, but, and here is the difference, the transaction is made at a future date.
This idea of agreeing on a purchase and sale that will materialize in the future is as old as the trade itself. In the Dutch markets of the 17th century derivatives were traded using as underlying asset the tulip bulbs. In Japan contracts were concluded for the future delivery of rice. The fact of being able to know what the price to be charged or paid for a harvest would be, made both the producer and the buyer, face the future with greater peace of mind. Tulip bulbs and rice were the underlying assets. In the nineteenth century, the first derivatives market was born in Chicago, in which wheat and corn contracts are still traded today.
Today contracts have very varied forms. We can mention futures, options, warrants, forward contracts, swaps, credit derivatives, the list is very long. They all participate in very sophisticated secondary markets, requiring special skills, as the old guru of my youth used to say. All are used to hedge and minimize risks, to speculate on underlying assets, and to hedge against price volatility, the latter being especially useful in the cryptosphere.
Just to show the complexity of contract trading, let’s briefly delve into one of the categories: the options. The goal is to show the primary logic of an option contract, and not the niceties of playing field practice.
An option is a contract between two parties (a buyer and a seller), through which the one who buys the option acquires the right to exercise what is indicated in the contract, although he will not have the obligation to do so. The contracts also establish that the operation must be carried out on or until a predetermined date and at a price fixed at the time the contract is signed (exercise price).
To acquire a buy or sale option, it is necessary to make an initial payment (called “premium”), the value of which depends, fundamentally, on the market price of the underlying asset, on the variability of that price, and on the period of time between the date the contract is signed and the date it expires.
The options that grant the right to buy are called “calls” and those that grant the right to sell are called “puts”. Additionally, European options are called those that can only be exercised on the exercise date, and American options those that can be exercised at any time during the life of the contract.
Option contracts then have the following characteristics:
- Underlying asset: asset to which the contract refers.
- Exercise date: expiration date of the right contained in the option.
- Strike price: price agreed for the purchase / sale of the underlying asset.
- Premium: is the price that the buyer of an option (put or call) pays the seller, in exchange for the right.
- Rights that are acquired with the purchase of an option: they can be call (buy right) and put (sale right).
It is said then that, in the markets of “contracts”, what is bought or sold are precisely “contracts”, and not the underlying assets that are contained in those contracts.
A call contract gives the buyer the right, but not the obligation, to buy a certain amount of the asset, at a certain price and on a certain date. The contract price is a premium that the buyer pays to the seller.
A put contract gives the buyer the right, but not the obligation, to sell a certain amount of the asset, at a certain price and on a certain date. The contract price is a premium that the buyer pays to the seller.
Let’s do a practical and simple example for a call.
Bob is bullish regarding BTC by the end of the year. Instead, Alice is bearish or at best believes that there will be no major changes in the price of BTC. Bob offers Alice the following contract:
“I buy you 1BTC at $20,000 on December 31st. I pay you now $100 as a premium if you accept ”(Bob thinks 1BTC will be worth $25,000 by the end of the year)
Alice doesn’t think 1BTC will reach $20,000 by the end of the year, so she accepts and collects the $100 Bob offered her.
Let’s do a practical and simple example for a put.
Bob is bearish regarding BTC by the end of the year. Instead, Alice is bullish and believes that BTC is going to grow steadily in the coming weeks. Bob offers Alice the following contract:
“I sell you 1BTC at $19,000 on December 31st. I’ll pay you now $100 as a premium if you accept ”(Bob thinks 1BTC will be worth $18,000 by the end of the year)
Alice thinks 1BTC is going to be over $19,000 by the end of the year, so she accepts and collects the $100 Bob offered her.
These (simply described) two contracts, are assets that can be traded in specific markets. An insightful trader, observing the assests traded between buyers and sellers, as the exercise dates of the options approach, may decide to buy the contracts and exercise them when the term arrives.
In general terms, and without considering particular strategies, the following table indicates the sentiment of buyers and sellers of calls and puts.
A quick read on this chart is this: if you are bullish, then you might consider buying a call or selling a put. If you are bearish, then you should consider buying a put or selling a call.
As can be seen, the operation with contracts requires high strategy, knowledge of future events, intuition, perception and nerves of steel above the average, in addition to the design of alternative strategies. And what we’ve described so far is a very simple part of this market. When things begin to become more sophisticated with leverage, margins and hedge strategies, we see that a total dedication to the operation is necessary, in addition to, obviously, a fine and developed talent.
This is what the old guru of my youth told me, “for this market you need professionals.” The poor old man didn’t know that in a few more years things like Bityard would appear.
2- The Bityard Solution
Bityard is a Singapore-based derivatives platform. Its mission is to simplify trading contracts with its slogan “Complex Contracts, Simple Trade”. Although it appeared on the market very recently, it has already attracted a large number of traders from all over the world.
The cryptocurrency markets have evolved so much since their birth, and continue to do so daily, that the appeal of launching new platforms is great and continues to amaze us every day. These platforms sometimes look a lot like each other, but from time to time, unique products like Bityard’s appear.
Bityard uses Tether (USDT) as the operating cryptocurrency. It also has a native currency, BYD, which is basically used to deduct trading fees. BYD’s total supply is 210 million.
OTC deposits can be made on the platform and, in this way, it is easier to operate without cryptocurrencies.
Bityard uses a weighted average of three major crypto exchanges, Binance (30%), OKEx (40%), and Huobi (30%), with the aim of displaying cryptocurrency prices as accurately as possible.
In each order that is launched, Bityard allows taking a leverage of between 5x and 200x and setting the margin of the operation, that is, the percentage of cryptocurrency that must be firmly available in the trading account.
The “Demo” option allows simulated trades that facilitate learning and puts us in contact with the difficulties of the operation. At the beginning, the program grants 100,000 USDT, and as orders are placed using the allowed cryptocurrencies as underlying assets, one can see the status of those orders and the balance of the current position.
Bityard has a very attractive affiliate program, known as KOL, which allows you to earn up to 60% of the commissions of all trading fees. In addition, it provides 1 to 1 assistance if you need professional help, from the business department of the company. With more than 100 referrals a “diamond KOL” is achieved.
Bityard charges 0.05% as a transaction fee, well below the industry standard of 0.075%.
But I think that, without a doubt, the most attractive feature of the platform is the “copy trader”. In such a complex market, being able to copy the operations that an experienced trader makes, is an attractive differential and a great invitation to try the route of investing in derivatives. The copy trade option allows users to imitate the contract trading of a list of traders who achieved their inclusion in Bityard after showing a successful story in the international contract markets. They will charge commissions between 8% and 10% of the trades, but I think it is worth learning from those in the know for that price, especially for beginners. In copy trade, you can follow exactly what the trader you chose to follow is doing, at the same time that they open or close a trade. But of course, it does not matter if the operation ends in loss or profit, in any case, you have to pay the corresponding fee to your trader.
Another very fun feature is mining.
When you click on “mining” a beautiful night image of a mountain range with different cryptocurrency icons appears. Clicking on the available ones with an amount, the corresponding value is credited as a minning asset in USDT, and this is called “gift money”, which serves to deduct from the fees charged when placing an order.
When you transfer mining gift money, it will be automatically added to the gift money balance, and will be automatically deducted when placing an order.
One last word, I want to make it clear that I asked the support team several questions, which were answered almost instantly and with great precision.
3- The Experiment
In order to investigate the operation of Bityard, and since there is the possibility of simulating the trading of contracts without using my own money, I did some operations that I show below.
Creating an account with Bityard is extremely simple, all you need is a valid email address, a password, and solving a captcha. Identity verification is not required. This takes less than a minute.
As details are added to the account and you begin to familiarize yourself with the platform, Bityard offers “beginner rewards”, which are added as coupons for the payment of fees.
The “demo trade” is carried out with real prices on the chart and without the need to use own funds. Bityard allocates an initial sum of 100,000 USDT in demo mode, so that you can test the operation of the platform and feel the vertigo of contract trading.
There are two key concepts in the ordering process: leverage and margin.
Leverage is the ability to use borrowed capital as a source of funding to invest or trade, which carries the potential to dramatically increase the return on an investment. For example, a 50x leverage allows a trader to place orders 50 times larger than his/her capital.
Margin is the percentage of the purchase price of an asset that the trader must pay with available funds in his/her account. Margin allows a trader to play higher values in a trade using (or collateralizing) a smaller sum.
With leverage and margin trading, traders have the possibility of achieving very high profits (or losses of the same size), without the need to have the asset in their wallet.
Placing an order in Bityard is also very easy.
On the initial screen, click on “trade”
This takes you to the screen where you can place your order. Do not forget to put the option “demo”. You have to choose the underlying asset, the leverage, and the margin, and then, you click “long” or “short”, and, after confirming, your order is on the market.
During the course of 5 days I placed 10 orders. I was not aware of what was happening, although, for not being a trader, I looked at the screen many more times than I do daily.
To see the results, from the initial screen click on “assets”, which takes you to an intermediate screen of queries:
By clicking on “my positions” you can see the current orders, and their history.
My final results are the following:
In some orders I made good money and in others I lost a lot as well. But in the end, having lost “only” $1254.74, is not bad for a no-experience-tough-and-harsh-old-rocker, right? This is (-1.25%) on 10 orders, considering commissions and fees. Thanks Bityard! You really make things easier.
If on the previous screen you click on “share” for each order, you can see the result of each one of them.
Here I show you the order in which I won the most money and the order in which I lost the most money.
Only in 4 orders I modified the TP (take profit) and the SL (stop loss) that the platform gave me by default. In all the orders I used different leverage and margin.
Now that I can’t give any more rock shows, I think I’m going to spend some time learning how to trade contracts. I recognize that the adrenaline that awakens is very mobilizing. Bityard is absolutely recommended.