$RON Perpetual Futures on FTX

CRYPTODAY 066

1. On Thursday, the Hongkong-based exchange FTX.com announced that they would be listing SkyMavis’ $RON token in their Perpetual Futures market. This surprised (and confused) people because the long-awaited Ronin token isn’t actually available yet. Introduced in early November 2021, many enthusiasts (myself included) have been faithfully accumulating $RON tokens by lending our funds to the Katana decentralized exchange, but the tokens we’ve earned are not yet claimable. So what’s going on here? Let’s dive in!

2. If you don’t actually know what Perpetual Futures are, here’s a short refresher. At its most basic, a futures market is a way for people to bet on the future price of an asset (in this case, the Ronin token). Now, this sounds like a weird definition, because most of you are already doing that when you buy Ethereum today in the hopes that its price will increase in the future. When you do that, you’re probably trading on the spot market, where you buy $ETH and hold it until the price has increased to your desired target, or sell it if the price gets too low and you need to salvage some of your original capital. In a futures market, however, you never actually hold the underlying asset; you only bet on its future value. When you decide to cash out, what you end up receiving is the counter-currency, which is usually USD or some stablecoin. We refer to these types of markets more broadly as “derivatives,” because their prices are derived from the underlying assets’ real-world market price. Kraken has an excellent report on the history of crypto derivatives here, for traders who want to do a deep dive into this world.

3. “Perpetual Futures” is a type of futures market that was popularized by Bitmex in 2016, although the idea for it has been around for a long time. Normal futures always have some kind of expiration date, where the trade automatically terminates and the trader receives the results of their bet. (Sometimes, they lose everything; this kind of trading is not for the faint of heart.) In contrast, Perpetual Futures stay open forever, until the trader hits the “Market Close” button or they “lose the bet,” so to speak. “PERP” prices also tend to be much closer to the real spot market, because you are not trying to forecast the price at any specific date in the future. So when FTX announced the RON-PERP market, my first thought was that they were kicking off price discovery ahead of when the actual $RON token becomes available. (Which implies that the real thing is probably a couple of weeks away from launch.)

4. When I woke up this morning, RON-PERP had already been trading for about 7 hours. It appears to have debuted at around $4.80 last night at 11pm, before dipping as low as $4.20 in that same hour. By the time I was looking at the charts this morning, it was hovering at just under $5, which coincidentally is my personal break-even target for RON staking in the Katana DEX. If you’re like me, you probably lent your funds to the Katana DEX back when ETH, AXS, and SLP were all doing much better in terms of fiat price. I’ve been accumulating RON rewards for two months now, and given the market dip, I needed $RON to be worth at least $5.00 to be able to say that I was notionally back at the original value of the investment back in November. $5 is good (it implies a 350% APR on the Katana liquidity pools) but if this is going to save my portfolio this month, it’ll need to be more like $7 :P
   

   

5. I experimented by buying $498 worth of “RON-PERP” at $4.9850. The screenshot above was taken about an hour after the buy, so the PnL (profit & loss) still says I’ve lost $13. When I click “Market Close” I will receive the “Notional Size” of the trade, or $485. (FTX currently charges zero fees for futures settlement btw.) The RON-PERP market is still very young and not yet very active … although perhaps that’s because I’m writing this at 8am and traders haven’t really gotten started with their day yet. We’re currently seeing about $1M in trade volume per hour, which is only a third of what AXS-PERP does.

6. Let me answer the question that most people will probably be wondering right now: is this the real price of $RON? Yes, but also, no. It’s real in the same sense that any price is real. That’s what the market says it’s worth right now, so yes, it’s the real price. That being said, FTX’s RON-PERP is a tiny fraction of the community, so it’s not really representative of the market as a whole. The Ronin chain facilitates the transfer of 15% of the world’s NFTs, so in order to discover the most “accurate” price for $RON, we should wait for it to be available on more exchanges for the real price discovery to begin.

   See you all next week, cryptofam! Don’t let the red days bring you down ❤️