Are Stablecoin Futures Built to Last?

OKEx, the world's fifth-largest crypto exchange, announced on Oct. 29 plans to launch Tether futures trading, featuring a linear contract with leverage of up to 100x. Stablecoin futures, the exchange said, offer a simpler and more efficient means to navigate the market, and could open the door for many new retail traders.

"If there is great interest in a USDT futures contract that would tell me that USDT is broken and that there is a lack of trust in Tether. If a stable coin has auditable reserves backing the coin, transparent governance, etc, then there probably wouldn't be interest in a futures contract - because there is very little risk to hedge."

In January, CoinFLEX introduced a new stablecoin-to-stablecoin futures contract that offered Tether against Circle's USD Coin.Tether is the most popular stablecoin by far, and its $4.2 billion in market capitalization ranks it fifth among all cryptocurrencies.

Asked if his firm, which is based and regulated in the United Kingdom, would be introducing a stablecoin futures product in the future, he answered, "I would never say never, but one advantage we have as an exchange is that we are regulated, so we find it easier to settle in fiat currency."

Lennix Lai, the financial market director at OKEx, rejected the implication that the new stablecoin futures product is inherently speculative or risky.

"We think a Tether-based product is definitely an easier product to understand than other futures in OKEX which are margined at its underlying [asset]. Btcusd futures mean you have to margin with BTC, for example."

New recordsWhile Kraken Futures' Schlaefer currently has no particular interest in stablecoin futures trading, he still expects derivatives to power the growth of the crypto markets.

"If you place an order that is big enough to move the price of one or more of these spot exchanges, you can make the index price move in your favor and benefit from the highly leveraged futures exchange at a relatively cheap cost."

In a sense, stablecoin futures seem almost redundant.

At that point, it should become clear whether stablecoin futures are built to last - or are a short-term stopgap.