United States-regulated trading and clearing platform LedgerX has released a new kind of derivative contract unique to Bitcoin (BTC), as per a blog post published on February. 5.
The new product referred to as LedgerX Halving Contract (LXHC) represents a binary option — an option where the payoff is either a fixed monetary amount or nothing — that settles to the estimated next time that Bitcoin halves.
Bitcoin halving is an event that happens roughly once in four years, once which the amount of latest Bitcoin created and attained by miners will be cut in half. The last time Bitcoin halved was in 2016, when the reward decreased from 25 BTC to 12.5 BTC.
LedgerX explains that the new derivative contract, “will permit you to get a fixed payoff if the subsequent halving block (#630,000) happens before a particular date and time. If the block is discovered after, the contract expires at zero.” based on current network conditions, the date of the subsequent halving block is estimated at may 25, 2020.
While binary choices are traditionally recognized as gambling since they're basically a “yes/no” bet, the post points out the uniqueness of Bitcoin in that “there is a fundamental economic risk that's binary.” LedgerX states:
“...imagine you're an oil producer like Exxon Mobile and know that one day in 2020, the number of barrels of oil you extract can go down by half, forever. however you’re not certain which date that may be. this might materially impact planning for investment and operations. Bitcoin miners face this actual risk approximately every four years for the block reward that they earn.”
In January, LedgerX launched its 1st Bitcoin price volatility index dubbed LedgerX Volatility Index (LXVX). “The LXVX incorporates the level of fear and uncertainty within the Bitcoin market, and therefore may be thought of as the "bitcoin fear index," within the same means the VIX is often referred to as a stock market fear index by market commentators,” the corporate explained.
LedgerX’s BTC savings product authorized by the U.S. Commodities Future trading Commission saw its debut in may 2018. The project is supposedly designed to modify BTC option trading to a basic point-and-click format, so “less sophisticated” bull traders will supposedly potentially get a premium price on their holdings.
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