⏩Futures Trading
Go Long or Short with up to x20 Leverage, Swap with 0% Price Impact
What are Futures?
Futures contracts allow traders to gain exposure to cryptocurrencies without the need to possess the underlying asset. It is similar to stock indices or derivatives contracts involving commodities, where an investor can take risks on an asset’s future value.
The dominant aspect of crypto futures trading is that it can protect investors against adverse market conditions. Traders can sell high and buy low to profit from the price difference, known as short selling. Essentially, crypto futures contracts allow market participants to make profits regardless of the price direction of the underlying asset.
Futures Trading on Synthswap
On Synthswap you can open Long and Short Positions with up to x50 Leverage. Alternatively you can use Synthswap Futures for Swapping with 0% Price Impact. Both, Market and Limit Orders are possible.
Long and Short Positions with up to x50 Leverage
Market Order
Limit Order
Swap with 0% Price Impact
Market Order
Limit Order
Long Position
Going long or taking a long position means buying an asset with the expectation that its price will rise in the future.
Objective: Long traders aim to profit from the asset's price appreciation. They want to buy low and sell high.
Risk: The risk in a long position is that the asset's price could decrease, resulting in a loss if the trader needs to sell at a lower price than they bought it for.
Profit Mechanism: A long position profits when the asset's market price increases because the trader can sell it for more than they paid.
Short Position
Going short or taking a short position means selling an asset that you do not own (borrowing it) with the expectation that its price will fall. At a later time, you aim to buy it back at a lower price to repay the borrowed asset.
Objective: Short traders aim to profit from falling prices. They want to sell high and buy low (covering their short position).
Risk: The risk in a short position is that the asset's price could rise, resulting in potential losses.
Profit Mechanism: A short position profits when the asset's market price decreases because the trader can buy it back (cover the short) at a lower price than they sold it for.
What are Orders?
In summary, long positions involve buying an asset to profit from rising prices and short positions involve selling an asset to profit from falling prices. These positions can be opened immediately (Market Order) or sometime later when the price suits your investment goal (Limit Order).
Market Order --> An order to buy or sell an asset immediately at the current market price.
Limit Order --> An order to buy or sell an asset at a specific price or better.
Simplified Example of Long and Short Positions
Norton entered a long futures position when SYNTH was trading at $40 while Solbytes entered a short position at the same time. Then, prices moved up and Norton and Solbytes decided to settle their positions at $45. In this case, Solbytes, who is holding a losing trade, will have to pay the exchange the deficit loss of $5 ($45-$40 = $5). Norton, on the other hand, will receive a profit of $5 from the exchange.
SLP Token
In order to make Futures Trading possible on Synthswap, especially for leveraged positions, deep liquidity is needed. To achieve substantial liquidity, Synthswap utilizes a token known as the Synthswap Liquidity Provider (SLP) Index Token. When traders incur losses, SLP holders gain profits, and the opposite holds true.
The SLP Index consists of:
ETH (50%)
USDbC (50%)
The constitution of SLP Index is subject to change, especially with the addition of new Trading Pairs.
How to Buy SLP Token
Buying of SLP Index Token is possible with any of the current Index tokens (ETH, USDbC). The process for redeeming is analogous.
Staking SLP Token
Fee for Leverage Trading on Synthswap Futures is set to 0.1%. The Fees are used to incentivize SLP Liquidity Providers and xSYNTH Stakers:
SLP Liquidity Providers - 80%
xSYNTH Stakers - 20%
To prevent sudden withdrawal of Liquidity, there is a 24h redemption period for the withdrawal of SLP Tokens.
How to Use Futures on Synthswap?
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