Crypto Valley Exchange (CVEX) stands out for its distinctive approach in the dynamic world of cryptocurrency trading. Contrary to the common trend, CVEX does not focus on perpetual contracts but instead emphasises the integration of expirable futures and options into its trading platform. This strategic decision stems from an in-depth understanding of perpetual contracts’ inherent limitations.

Understanding Perpetual Contracts and Their Shortcomings

Perpetual contracts, while popular in the crypto space, have notable disadvantages. They are often inefficient in capital utilisation, limiting their effectiveness in diverse trading strategies, particularly in hedging. This inefficiency is a barrier to the growth of a robust options market, as these contracts lack the necessary flexibility for various hedging tactics, including delta hedging.

Significant design issues and market risks overshadow the ease of implementing perpetual contracts within DeFi frameworks. Many protocols depend on failed trades to fund lending pools, a system that inherently favors retail failures over successes. This leads to skewed market risks and undermines the long-term value of these products for hedging. Additionally, the risk management models often result in imbalanced market conditions, posing risks for long-term hedges and potentially leading to market instability.

A Focus on Futures and Options

Recognising these challenges, CVEX has prioritised futures contracts and options in its offerings. These instruments are launched monthly and have a three-month lifespan, ensuring the availability of three active futures at any given time. This approach aligns with the platform’s commitment to providing diverse trading options, catering to different strategies and risk profiles.

Futures contracts on CVEX are meticulously designed to provide an edge to liquidity providers, with the bid-offer spread tailored to enable profitability. The final settlement of these contracts occurs on the last Friday of the expiry month, with a settlement fee designed to incentivise the closing of positions before the final settlement. This strategy reduces system load at settlement and minimises overall risk.

Options contracts on CVEX complement the futures schedule, offering a range of strike prices based on anticipated contract volatility. This structured approach allows traders to engage in various strategies, leveraging the dynamic nature of both futures and options markets.

Conclusion

CVEX’s commitment to not being a perpetuals DEX is a bold step toward more efficient and risk-managed crypto trading. By focusing on expirable futures and options, CVEX sets new standards for fusing traditional finance principles with decentralized finance innovation. This approach is about providing trading options and ensuring stability, efficiency, and risk management in the crypto trading landscape. Join us at CVEX as we redefine the future of cryptocurrency trading, where the focus is on sustainable growth and comprehensive risk management.

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Welcome to the forefront of decentralised finance innovation at Crypto Valley Exchange (CVEX). Today, our focus is on a feature that’s changing the game in digital asset trading: Cross Margin Capability. This advanced feature is not just an addition to our platform; it’s a paradigm shift in how traders manage and leverage their assets. Offering unparalleled flexibility and efficiency, cross margin trading on CVEX opens new avenues for seasoned traders and newcomers to navigate the market with greater agility and strategic depth. Join us as we delve deep into the inner workings and remarkable advantages of the Cross Margin system on CVEX.

Understanding Collateral and Margin in Trading

In the dynamic trading environment of CVEX, collateral and margin play pivotal roles. Every open position on our platform necessitates the provision of collateral, which is secured as a margin. This margin is more than just a requirement; it’s a critical safety net, ensuring traders have a buffer to cover potential market swings and losses. It’s the foundation of robust trading, striking a delicate balance between ambition and prudence. In this ecosystem, where market conditions can shift rapidly, having a reliable margin system is key to maintaining confidence and stability in your trading journey.

The CVEX Cross Margin Approach

At CVEX, we’ve reimagined the conventional margin system with our innovative cross margin mechanism. Unlike traditional platforms where the margin is isolated per position, CVEX’s cross margin system calculates margin requirements based on your entire portfolio. This comprehensive approach accounts for the interplay between different positions.

Cross margining on CVEX represents a major leap forward in trading efficiency. The key advantage lies in the substantial reduction of the overall margin requirement across your portfolio, as opposed to the cumulative margin needed for individual positions. This efficiency translates into more judicious use of your capital, allowing you to unlock more trading strategies with less capital tied up as margin. It’s a smarter way to manage your resources, opening up opportunities for increased market participation and potentially greater returns.

Enhanced Benefits for Hedged Positions

Traders who master the art of hedging in their portfolios find cross margining particularly beneficial. When you balance your positions effectively, CVEX’s cross margin system recognises the reduced risk and correspondingly lowers your margin requirements. This advantage frees up more of your capital, which can be redirected to explore new trading avenues or diversify your investment portfolio, further enhancing your trading strategy and potential returns.

At CVEX, we understand that effective risk management is the cornerstone of successful trading. That’s why our platform includes ongoing portfolio monitoring, encompassing both collateral and any unrealised gains or losses. This vigilant approach ensures a harmonious balance between your trading ambitions and the ability to absorb market fluctuations, maintaining a healthy margin-to-equity ratio and securing your financial stability in the volatile world of crypto trading.

Protective Measures with Clearance Bots

Effective risk management is key to successful trading. Our platform continuously monitors your portfolio, including collateral and unrealised gains or losses. This ensures a balance between your trading goals and market volatility, maintaining financial stability in crypto trading.

We prioritise safety with features like Clearance Bots. These bots activate when risk levels rise, starting liquidation processes to minimise losses and maintain market integrity. This might seem strict, but it’s a vital protection against significant financial losses due to sudden market shifts.

In summary, the Cross Margin Capability on CVEX is a testament to our commitment to offering advanced, trader-centric features. It not only allows for more judicious capital management but also includes built-in protective mechanisms. This feature exemplifies our dedication to enhancing the trading experience, making it more efficient and secure for our users. Join us on CVEX to experience the transformative power of Cross Margin in your trading endeavors.

In the fast-paced world of decentralised finance, CVEX stands out with its advanced margin and liquidation methodologies, designed to balance capital efficiency with market integrity. Let’s break down how CVEX optimises trading safety and fairness through its innovative financial models.

Dynamic Margin Methodology

At the heart of CVEX’s approach is a dynamic margin model that employs a Value-at-Risk (VaR) methodology. This model calculates collateral requirements by considering market volatility, correlations between assets, and potential extreme losses, providing a comprehensive risk assessment. The initial margin is set to cover potential losses within a specific confidence interval, ensuring traders have sufficient collateral. A key feature is the concentration adjustment, which mitigates the risk posed by large positions in a single portfolio, promoting a balanced trading environment.

Pricing for Futures and Options

Futures

The Mark Price for futures contracts is determined using a moving average basis, which helps to mitigate the impact of price discrepancies between futures and spot markets. This ensures that the valuation of positions reflects true market conditions.

Options

Premium Mark Prices for options are derived using the Black-Scholes model, adjusted for real-time market volatility. This integration allows for accurate pricing that responds to market dynamics, ensuring options trading is both fair and responsive to current conditions.

Liquidation Protocol and Counterparty Risk Management

CVEX’s liquidation protocol is designed with stability and fairness in mind. Liquidations are executed through market orders to ensure positions are closed at fair value, with the Default Fund acting as a safety net for covering losses. This fund is carefully managed to minimise counterparty risk, ensuring the trading ecosystem remains secure.

Counterparty liquidations are considered a measure of last resort, with a focus on preserving market balance. The Deleverage Queue system provides transparency, detailing the order in which positions may be liquidated. Moreover, the Default Prevention system proactively cancels high-risk limit orders, preventing unnecessary liquidations by assessing the potential impact on the margin ratio.

Conclusion: Balancing Efficiency with Security

CVEX’s margin and liquidation methodologies represent a significant advancement in decentralised trading, offering traders an optimised balance between leveraging opportunities and the safeguards necessary to maintain a stable market. By dynamically adjusting margin requirements and employing a fair liquidation protocol, CVEX ensures that trading remains both efficient and secure, fostering a trustworthy environment for all participants.

As we look towards the launch of our testnet, CVEX is committed to providing the tools and mechanisms traders need to succeed, all while upholding the highest standards of market integrity. Join us in shaping the future of DeFi trading, where innovation meets security.

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The cryptocurrency trading world has come a long way, evolving rapidly from its early days. Big names like Coinbase and Binance have brought stability and innovation, yet the crypto landscape still faces significant challenges, especially in its on-chain infrastructure.

Lack of Essential Derivative Infrastructure

Although platforms like Uniswap have revolutionised token exchanges, a key piece is missing: advanced financial tools like futures and options. These tools are vital in traditional markets for risk management and optimising portfolios, but they’re scarce in the crypto world. This gap not only limits investors but also exposes them to higher risks.

The Urgent Need for Sophisticated Tools

For the decentralised Web 3.0 to thrive and support efficient capital flow, integrating advanced financial instruments is crucial. As competition for capital intensifies with advancements in other sectors like AI, the need for these tools in crypto becomes more pressing.

Challenges in Current DeFi Systems

Efforts to introduce derivative products by platforms like the former FTX and Binance face trust issues, inefficient margin requirements, and unclear regulations. These challenges hinder the true decentralisation of blockchain and its ability to scale these capabilities.

Limitations in Ecosystem Development

The crypto market’s ecosystem is still developing. The growth of brokers, structured product providers, and builders is essential to move beyond speculation and create a platform that truly supports decentralised growth.

The Importance of Liquidity Development

Success in DeFi protocols heavily relies on strong, efficient liquidity. Many DeFi models struggle with liquidity provision, with market makers and providers often relying on token incentives or external payments. A shift is needed to make liquidity provision profitable, focusing on elements like tick size, contract size, and transaction fee structures.

A Specialised Market Maker Program

To overcome these challenges, we propose a specialised market maker program combining token rewards with adjustments to instrument sizes and transaction fees. This approach aims to attract not only designated market makers but also regular traders and scalpers, emphasising the importance of developing liquidity.

While crypto trading has advanced, the absence of vital on-chain derivative infrastructure remains a major hurdle. To fully unlock the potential of DeFi and merge it with traditional finance, we must introduce sophisticated financial instruments and foster a robust ecosystem for decentralised growth.

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