Image: AFP

An up-and-coming Bitcoin derivatives exchange now allows its clients to bet on Bitcoin’s future mining difficulty – and most are longing the new contracts, Forbes reported.

The FTX exchange announced last night that its Bitcoin Hashrate Futures are now live. These contracts will trade against Bitcoin’s future mining difficulty; since mining difficulty is inextricable from hashrate, you’re basically betting that Bitcoin’s hashrate will decline or increase over the contract’s lifespan. 

“FTX’s Hashrate Futures are futures that expire to the average BTC mining difficulty over a period of time. This means that they roughly represent the total hashpower being used to mine BTC,” the blog post notes.

The terms of the contracts are dictated quarterly. In other words, they begin at the start of a quarter and run their course through the end of another one. The contract is settled by taking the mining difficulty average during the contract’s timeframe and dividing this by 1 trillion.

Not even 12 hours after the launch, futures contracts that are long Bitcoin’s hashrate for Q1 of 2021 are surging, up 20% over the last day. The 24-hour volume on the contracts is just shy of $1 million.

The interest in these contracts isn’t surprising given the boost in publicity Bitcoin has enjoyed lately. From headlines about the halving to brandname legacy investors like Paul Tudor Jones entering the market, Bitcoin is soaking in the limelight at a time of unprecedented central banking monetary and fiscal intervention

It’s even less surprising when we consider that these contracts are the first of their kind for Bitcoin’s barely-11-year-old markets. A contract like this could be a boon for miners who have lacked proper market tools to hedge their operations. For a group that usually has all its eggs in one basket (not just Bitcoin, but the hardware that drives it), futures like this are necessary for them to take the opposite side of their bet.

That’s part of the reason why FTX built this option, because of demand from miners.

“We’ve been talking to a bunch of miners recently and received a ton of interest in it and related products,” Sam Bankman-Fried, FTX’s CEO, said over direct messages.

“For a while the crypto industry was mostly ‘a way to trade BTC.’ I’m excited to help the industry branch out and become a more fully fledged ecosystem, with infrastructure to support it,” he concluded.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.