2020 Dec USDT Perpetual Contract Research Report

TI Research

As the rising star of the crypto derivatives market, there is no doubt that the USDT perpetual contract is one type of most-watched products in 2020. As of late 2020, the monthly trading volume of USDT perpetual contract has exceeded $700B, which has accounted for more than half of the perpetual market. Based on perpetual market data in 2020Q4, TokenInisght analyses USDT perpetual contract market systematically, including but not limited to design mechanism of contract, product mechanism, macro-market overview, and liquidity. TokenInisght finds that on one hand, there is a situation of ‘one great power and multi-great power’ in USDT perpetual contract, BTC/USDT trading pair is the absolute mainstream, and the up-and-coming exchanges represented by Huobi performed well. On the other hand, the exchanges of USDT perpetual contracts are diversifying from many aspects, which may have a relationship with different user groups served by exchanges.

Executive Summary:

1. Compared with inverse perpetual contract, the USDT perpetual contract is more easy to understand and calculate, and relatively less risky.

2. For the USDT perpetual contract, mainstream exchanges often adopt a four-stage risk control system designing methodology of "margin-leverage-liquidation mechanism-risk sharing mechanism". As the market matures, the risk control ideas of USDT perpetual contract product will develop along the two paths of "refinement" represented by Huobi and "simplification" represented by BitZ.

3. USDT perpetual contract products has occupied half of the crypto derivatives market, and the distribution of market trading volume is currently in a situation of "one great power and multi-great power”. Besides, the leading exchanges lack competitors, which indicates the possibility of monopoly.

4. BTC/USDT perpetual contracts account for the absolute mainstream of the market, and the number of contract varieties is positively correlated with the exchange’s share of the market trading volume. Increasing the number of contract varieties and enriching the product line will help enhance the exchange’s competitiveness in the USDT perpetual contract market.

5. Compared with inverse perpetual contract market, the USDT perpetual contract market has a relatively low liquidity score. The reason may be related to the different risks and returns of different types of contracts.

6. In terms of market depth, among the current mainstream USDT perpetual contract exchanges, Binance, Bybit, and Bitget’s BTC/USDT perpetual contracts have better liquidity, and FTX, OKEx, and Huobi’s ETH/USDT perpetual contracts show good performance. 

7. In the future, the exchanges will modify the USDT perpetual contracts from the perspective of risk control mechanism and product operation, and may combine the advantages of inverse perpetual contract and USDT perpetual contract to launch hybrid contract products.

TI Research

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