JC: I’ve been deeply involved in the DeFi landscape since 2018 as part of the early team at Synthetix. Our core focus was developing tradeable synthetic assets and on-chain perpetual decentralized exchanges (DEXs) on Ethereum and Optimism. On-chain dexes and perpetual AMMs offer traders the security and transparency of trading on smart contracts and price exposure to crypto-assets.
Synthetix was one of the pioneers in deploying and working with Optimism, a Layer 2 scaling solution designed for Ethereum. In terms of volume, Synthetix’s perpetuals have achieved considerable success, with a current daily volume between $100 million and $500 million. This speaks volumes about the acceptance and utility of the product we built from the ground up.
2. As someone who was directly involved in building one of the first and leading derivatives protocols, what are some essentials for building an attractive platform for traders?
JC: An intuitive user experience (UX) is crucial. This involves easy deposit mechanisms for major stablecoins like USDC, USDT, and DAI, which allow traders to quickly get on board and start trading.
Capital efficiency is another vital component. By offering features like cross-margin for collateral accounts, you can maximize traders’ potential returns and minimize unnecessary liquidation risk. In the same vein, providing access to leveraged price exposure enhances capital efficiency, enabling traders to amplify their trading positions.
Ensuring deep liquidity and tight spreads for major crypto pairs is another must-have. This reduces slippage and provides traders with the assurance that they can enter and exit positions easily.
Cross-chain support is increasingly becoming a necessity in the DeFi landscape. By allowing traders to keep their margin where they have the most liquidity, you increase flexibility and accessibility.
A strong distribution model is key. By partnering with various frontends and trading platforms where traders already hold their positions, you can significantly expand your user base and increase the visibility of your platform. All these factors combined will greatly enhance the attractiveness of a crypto derivatives platform for traders.
3. With that in mind, what sparked your initial interest and investment in Bracket?
JC: The team’s extensive traditional finance experience in building structured products stands out. They offer traders access to price insurance on their investments and protect stablecoin pegs via underwriting options, addressing the large market of over $100 billion worth of stablecoins in circulation.
Bracket leverages crypto options for underlying products, and the potential to distribute these structured hedging products via intermediaries beyond just wallets like Metamask is promising. Venues such as crypto exchanges and decentralized exchanges like Uniswap are a few of the prospective integrations. With Bracket originating these products with Liquidity Providers (LPs), the platform is uniquely positioned in the DeFi space.
JC: Volatility, a measure of the price movement of an asset over time, plays a significant role in trading, especially in the field of crypto derivatives like perpetual futures.
In high volatility conditions, the price of the underlying asset can change dramatically in a very short period. This can create opportunities for large profits, but also substantial losses. Traders might get liquidated more frequently if they can’t cover their maintenance margins. High volatility can be a boon for day traders and swing traders who thrive on price swings
In contrast, in low volatility conditions, the price changes are less dramatic. This may result in fewer trading opportunities and lower potential profits in the short term. These periods can provide a more predictable trading environment and may be better suited for long-term strategies.
JC: Range-bound derivatives are a type of financial instrument whose payoff depends on whether the price of the underlying asset stays within a specified range during a certain period
In a low-volatility market, like in the current bear market, where the price of an asset is not expected to change drastically, range-bound derivatives can be particularly useful. The reason for this is that these instruments can enable traders to generate returns even when the price of the underlying asset is relatively stable and not exhibiting large swings.
For example, consider a range-bound derivative contract on Bitcoin, where the range is set between a lower limit of $25,000 and an upper limit of $35,000. If the price of the cryptocurrency remains within this range for the duration of the contract, the trader would receive a payoff. However, if the price falls below $25,000 or rises above $35,000, the trader would not receive any payoff, or may even incur a loss.
These derivatives can serve as effective tools for traders to earn profits in low volatility markets, as they don’t rely on large price swings to generate returns. However, they require a good understanding of the market conditions and the asset’s price dynamics to correctly establish the price range.
These range bound derivatives are also useful for stablecoin peg protection, where if the price of a stablecoin goes beyond the lower limits it will payout to the trader.
We hope you enjoyed and learned from Volume 1 of our interview series, and a huge thank you to Jackson for sharing his insights on crypto derivatives markets.