The ETH-USD Perpetual Contract is live for trading on dYdX. For the first time, traders can get up to 10× leverage on their $ETH without converting to any other token. This gives traders the simplest way to gain leverage in #DeFi.
— dYdX (@dydxprotocol) August 4, 2020
While the product is unavailable to US users, dYdX perps are the first offering Ether-based collateral, contrary to centralized exchanges like Bitmex using Bitcoin.
As a part of the rollout, dYdX will be offering a 50% discount on all trading fees for the next 7 days.
Touted as an inverse perpetual contract, the ETH-USD perps “are quoted in USD but margined and settled in the base asset — in this case ETH. The benefit of this type of contract is that users do not have to take on any stablecoin exposure, and can use ETH that they likely already hold to trade with. Traders can now obtain leveraged long or short exposure to ETH while using ETH as collateral and earning returns in ETH.”
For anyone who has used dYdX’s margin product, you may recall that in order to open a short on ETH, users had to post DAI as collateral. Now, this can all be done using ETH, allowing traders to enter and exit with DeFi’s popular settlement token.
We’ve even got a tutorial on how to trade the BTC-USD perps which can be easily adapted to the newly launched ETH contracts.
What’s to Know?
The minimum order size for ETH-USD orders is set at $200 USD, with orders below $1,500 being either market or fill-or-kill, meaning they must be placed a specific price in line with the market’s spot rate.
The maintenance margin requirement is set at 7.5% featuring -0.025% Maker and 0.075% Taker fees. Just as with the BTC-USD perps, dYdX’s funding rate is updated in real-time, giving it a competitive advantage over exchanges like BitMex who’s funding rates settles in 8-hour intervals.
The launch of ETH-USD signals the start of a variety of other perpetual contracts, giving DeFi traders based outside the US access to one of finances’ most critical pieces of infrastructure in a permissionless, non-custodial fashion.
DeFi Futures Heat Up
While dYdX continues to run away with its lead in the DeFi margin sector, competitors are hot on its tail.
Whether it be the newly announced DerivaDEX exchange or the community-favorite FutureSwap which closed just three days after launch due to exponential demand, it’s clear the appetite for these products is highly desirable.
With compliance playing a huge role in dYdX’s inability to serve US customers (who aren’t savvy enough to use a VPN), it’s apparent that competitors based in other jurisdictions will look to steal some of dYdX’s market share in the coming months.
In the meantime, it’ll be interesting to watch these contracts shape up right in the midst of an ETH bull market.
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Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.