PowerTrade is expanding derivatives trading in cryptocurrency

0:01i'm ashton addison from block west capital for investmentpitch media and the Crypto Coin Show and today on blockchain interviews we have tom howard the head of business development at powertrade tom welcome to the show and thanks so much for taking the time to come on hey thanks for having me here ashton you're very welcome i'm excited to dive into something that's really interesting and

0:21i think it's going to be huge in cryptocurrency is options and derivatives in cryptocurrency you know one of the biggest markets in the world in tradify so i would love to first of all just kick off our conversation by hearing a little bit about power trade and overview of the platform and some of the solutions you're driving into the cryptocurrency industry

0:44yeah and it's funny you should bring up that you know you expect that options is gonna get really big because that's the whole reason that we started power trade when you when you look at the traditional options market in equities it's kind of you know multiples of magnitudes higher trading volume than spot markets and it's roughly about half

1:05the trading volume of your futures markets right and so we look at crypto and we saw in about 2018 the crypto industry really matured when it comes to futures where previously 2017 and before that was all about spot trading and that's just you know normal your normal asset trading in 2018 people really got turned on to futures and perps

1:32and the futures market really exploded so for instance in the month of i believe march or april there was about two trillion dollars trading volume in the futures marketing crypto which is about you know more than ten times the spot market at you know at the same time options are still a little bit undiscovered in crypto and so options traded at about 30 billion

1:58dollars trading volume in march so we kind of expect that you know from that 30 billion it's going to go up to about half of the futures market like it does in the which would mean you know you'd have a two trillion dollar a month market so yeah we you know this was something that we kind of identified in early 2020 that options is kind of the

2:18the final frontier of option of financial primitives in crypto and so yeah we started power trade to bring the sure options market to the crypto space so yeah very cool yeah there's it sounds like there's huge growth ahead and you sound like you're in the right industry so and there's a lot of crypto traders that just haven't touched options derivatives at

2:46all you know they just stick to either buying bitcoin or just buying spot you know major cap coins and it would be great if you could just give a little bit of background on you know four crypto traders that haven't used options yet and derivatives you know what makes it so significant what's the difference between just buying bitcoin and buying major cap coins

3:07sure yeah so there's there's a couple of things so options are are a tool that you can do a lot of different things with right and futures are kind of mostly used for traders to take a very high conviction trade by getting leverage on their capital right so if you're trading perps on bitcoin maybe instead of just buying a tenth of a bitcoin point one bitcoin

3:37with your money which i think that today is like five thousand dollars you can take that five thousand dollars you put it in a futures exchange so that's basically if bitcoin goes up you're getting 10 times your profits than if you just bought one bitcoin basically gives you the exposure to a whole bitcoin with the tenth of the price of bitcoin

3:58now the downside with that is that if we go and so there's what happens in the in the futures market is you have often you have liquidations which is people have lost that initial principle that they put in and you have to watch the market when you're trading on leverage it's very stressful you have to watch the market non-stop to make sure that you're not you're not gonna

4:22get liquidated or you're not losing too much money so it works you know when it does well it's great but when it doesn't do well it's not so with options it's a little bit different options gives you essentially you're buying the right to buy bitcoin at a certain price by a certain expiration date and so if you think that bitcoin's going to

4:45100k by december you could buy a contract today say for 60 000 so you can you can you have the right to buy bitcoin at 60 000 until the end of december and if it does go to a hundred thousand then you've got a forty thousand dollar profit and so one of those contracts today i'd have to check the price my guess is probably going to go for a couple thousand dollars

5:09and so you can see you can get those leverage payoffs with options but if the bitcoin price goes down before it goes up you don't have to worry about being liquidated you just wait until it goes up and then you can sell your option contract so it kind of gives it's a different flavor of leveraged trading at its very kind of basic approach and it takes away that stress of

5:34being liquidated versus the futures markets so that's kind of that's kind of the you know that i would say that's the most fundamental use case and then there's a lot other more advanced strategies that you can you can apply with options as well which i'm happy to dig into definitely thanks for that tom that's that really does help i think shed light

5:56and yeah most there's a reason why a lot of retail traders stick to spot because with derivatives you know it's high reward it's also high risk and you know most of the time when you're just starting out there's a good chance that you're going to get liquidated and then lose all of your money so you know a lot of people that aren't experienced traders

6:19most people recommend to them like just use it like a little test platform to start or you know don't put all your money in leveraging because it's it's risky it's risky but at the same time options as you mentioned sound really good as well because you have the option to purchase you don't actually have to purchase if it doesn't go in your favor you know

6:40if you're out of the money so you just lose the contract price which is not going to be all your money which is great so i would love to get a snapshot from powertrade on you know how long has your team been working on this are all of these functions that you talked about live on the platform right now or where is powertrade at yeah so we actually started this about a

7:06year ago yeah we embarked on this journey and yeah we've we've been live and kind of improving the platform last couple of months and we're at a point now where we've we've just released eth options to go with bitcoin options and we have what's called a span margin system or folio margin system means that if you're getting less risky

7:32trading then you have more kind of leverage on your trading capital the better you manage your risk then the less capital you need to open those trades so it's really useful for you know more advanced trading are are kind of mana you know trading these different strategies so yeah we're we're live on ios android and with data on web which you know you can sign up to

7:59get early access to the beta and yeah we are a little bit different than the other markets where kind of price things and all you know if you're if you're buying a bitcoin contract it's priced in bitcoin everything which makes a little bit easier the price so yeah we've got these things live right now and we're soon to be rolling

8:26out a full suite of futures perps and spot markets to go along with our options markets that's really interesting i sort of build up credit to you know not have to risk as much capital if you can prove that you know how to handle it and that you're a good trader so i like that concept and i was reading on power trade about capital efficiency i'm not

8:48sure if that's the same thing or maybe you can talk about capital efficiency and you know why it's important for traders yeah sure so imagine that you have a you have a profitable trade and it's making you know 10 a month or 10 a week right but in order to execute on that trade you need to have half of your money another exchange in order to hedge

9:13and you have half the money exchange to take advantage of this whatever an arbitrage or something strategy that you found right so on other options platforms they don't have all of the products so if you have an options strategy and you need to hedge the price fluctuations in bitcoin you have to go do that on another exchange and so you basically have

9:40your capital split in half so while if you're trading on one exchange the profit might be 10 a week since you have to split your capital in half it's actually five percent a week right so capital inefficiency essentially the more you can do in one place the more essentially trading credit available you have on margin then the higher rewards you get for each

10:03dollar that you have on the exchange so the core of what we're doing is bringing all of these different trading products if you want to trade an option strategy you can also trade futures perps and spot on powertrade and if you're trading an option strategy you'll be able to use your spot positions or your futures positions as collateral to trade options

10:24and so that's capital efficiency you get more roi per dollar on the single platform definitely and that makes sense and in terms of the amount of products and different kind of derivatives and options available are you guys pretty in depth with you know what kind of options you have on the system yeah so we're we're still pretty new so we just have you know vanilla

10:52bitcoin and eth options right now and we plan to roll out more options markets in the future so we know that things like doge are pretty popular and there's interest in you know options on doge so look out for things like that in the future but yeah it's you know we it's basically it's it's it's vanilla options on bitcoin and eth and yeah it's it's pretty

11:17straightforward it's kind of what you'd find on the equities markets definitely yeah and i think that's a great starting point and you know for those traders that aren't familiar with leverage they say stick with bitcoin and ethereum if you're going to do leverage because once you get to small cap coins and they can move if something moves 10 or something

11:39that doesn't have a lot of liquidity and you're leveraged you know something does a quick five percent dip and you're in 10x then you know half your money is gone in a second so obviously that's gonna it's a higher risk higher reward but sometimes the liquidity needs to be there and you really need to stick to those fundamentals so with bitcoin and ethereum i think

11:59those are great options yep and the interesting thing about options as well is it's actually the more you learn about them the more you actually learn about risk management so the example i gave in the beginning is using a what's called a call option to essentially get leverage payoff on bitcoin right however there's more conservative strategies

12:22if you think that all right i've got a bitcoin but it's not going to go to 100k by the end of september you can actually go 100k bitcoin option and you collect a premium right so you can earn more bitcoin you just you know kind of earning a percentage on your bitcoin by selling these call options and you've got a bitcoin so if it actually does go

12:44above 100k it's offsetting your bitcoin is offsetting that payout that you would be owing so that's let's call it a covered call strategy and it's a pretty popular way of kind of earning more on your bitcoin if you want to be a more more conservative trader definitely and yeah covered call great great example of another trading strategy and there's so many with

13:07options that you know you really got to do some reading into all the different ways in which you can take strategies and make moves yeah we actually have we've actually got a i'm not sure when this is going to be pushed but i think we should have a bunch of educational content up by the time this goes live yeah so you can go in and learn about these more advanced

13:30advanced strategies on power.trade amazing great and i also wanted to touch on i saw that within the ecosystem you know while you're trading there's also the power trade token that's included in the platform and i wanted to know you know what's the main functionalities besides you know what i saw in the platform and are there other use cases for power trade token and does it create

13:55a sustainable ecosystem moving forward years down the line for everyone that's using the platform yeah so we look at that it's called power fade power trade fuel and so it's a dow that's basically liquidation reserve for right now just power trade but in the future other well and so if you look at you know an exchange like bitmex they've got this

14:21insurance fund and it's massive it's worth a few billion dollars right and the idea there is if liquidations cause traders to go bankrupt then that fund basically covers the bill so that the winners aren't left holding the bag right and so it's it's a good idea but you look at that and you kind of think like okay but who you know there's a bit of a

14:45conflict of interest there who's in charge of that fund and who who decides whether or not it gets paid out and you know what happens if there's just like too much money in that fund like should that money be put to better use if it's too big it's way more than the exchange could ever lose what happens there and so the fuel dow is basically the answer to those

15:05problems where it maintains this liquidation reserve so it has an agreement with power trade as a doubt that any users who go bankrupt due to you know not meeting their margin requirements and not being able to be liquidated fast enough their their accounts are covered out of that liquidation reserve and basically it's all managed by a dao

15:31and it's all managed by treasury in exchange we are actually paying 25 percent of our trading fees into the treasury of that dow and the dow basically is capital so we have a couple of you know liquidity mining incentives and we've got a few that are live now and you know some more that are going to be announced in the future that helps get the token in the hands of

15:58the users of the community and in particular in the hands of folks that have shown to have some understanding of risk management because they're the ones that will be affected if something goes wrong so yeah they'll be the token holders and they'll be deciding how that liquidation reserve gets used and what to do with those funds and how

16:18to cover these kind of swan events that happen in crypto definitely yeah i think that's a great methodology and there are there can be a lot of money in those insurance funds so to sort of give the hands over to the community and the people who are actually trading on the platform i think that's genius idea so very cool and you know we don't have a lot of

16:42time tom but i want to look forward to power trade and you mentioned you know you're coming out with more education potentially more trading pairs more options things like that you know what's the big things that are in store for power trade in the coming months and into next year yeah so i don't want to i don't want to tilt our hand too much on some of the

17:03things that we're working on but i would say that the big things that are already public we've got perps and futures and spot markets rolling out really quite quite soon and will actually be the first options exchange to have a multi-collateral spot markets multi-collateral you know spot futures perps and options markets all in one place

17:23and all portfolio margin together so you're gonna get that capital efficiency boost that just hasn't existed in crypto yet so that's something we're really excited for and you know maybe i can drop a little bit of a teaser but you know i've been i've been a defy geek for quite a while i found a community called define nation in what was it

17:452019 so it was way before d5 was popular and you know quite familiar with the space and so you know i would say that we're working on things that i think are going to be pretty interesting to the d5 community so yeah some exciting things to look out for that's great and for the viewers that are looking to learn more about powertrain and to start

18:10use it and using it exploring some of the options that are available right now what's the best way for them to get involved yeah so the easiest starting place is to just go to the website which is power.trade we got the dot trade domain and so from there you can if you're not you know a us user you can you can download the apps sign up for the beta

18:33we have a in the menu there's a resources list so you can learn more about the token if you're interested in the fuel dow i would say that we also have some really interesting content on our youtube because we worked with delphi digital i don't know if you know them but they worked with you know synthetics and ave and axi on their token economics so

18:52we worked with them on designing our field out as well and we've got a really interesting interview on our youtube channel with them that kind of lays that out and we're going to have a few more announcements around the fuel dow in the in the in the coming weeks as well so yeah i would say you know keep keep up to date there and also on twitter we're at

19:12hq sounds great tom i will leave all those links in the description box below all the best with powertrain to you and your team moving forward and let's follow up in the near future thanks for having me ashton