Last week, we revealed our roadmap for the rest of 2020 and the markets and features we’ll be rolling out. This post will carry out a fundamental analysis on the effects of these plans on the DGTX token and follow up on a previous report which presented a visualisation of the market size for some of the upcoming markets that the DFE will be implementing before the end of this year.
The DGTXUSD Token Performance
At the time of writing, a top-level view of the DGTXUSD token performance looks as follows:
Last week’s roadmap which outlined the next steps for Digitex during 2020, will bring the Digitex platform to a level way beyond its biggest competitors. It provides an overview of the next steps for Digitex, the fundamental analysis of which is looking exceptionally bullish. In this report, we will examine where the DFE is now, and start to look at what it aims to deliver before the year is out.
Currently, The DFE only has one trading pair available on the mainnet; BTCUSD. Since its launch, Digitex has been in and out of the top 10 rankings for this trading pair when measuring 24-hour trading volumes on derivatives exchanges, a snapshot of which can be seen below. Having only been open to the general public for two weeks, this is a great achievement for the exchange. Recently, ContractMarketCap has listed Digitex Futures Open Interest metrics which outlines two key pieces of information:
- Zero-Fees encourages trading by a factor of 61
- Digitex hasn’t been adopted yet, but when it is, volumes will be beyond compare
Below is a snapshot of the top 10 derivatives exchanges for the BTCUSD market, ranked by 24-hour trading volume. At the time of this image, Digitex Futures market sits in 11th place with $557M volume and $1.92M open interest. This gives the DFE a ratio of 293:1 for Volume to Open Interest, and although outsiders will scream wash trading, I will scream no-fees. The real potential for Digitex’s unique no-fee exchange has been difficult to quantify as there is no other platform in the world to benchmark against as every other exchange charges maker and taker fees.
Averaging the Volume to Open Interest ratios for the top 10 exchanges above Digitex results in a ratio of only 4.78. These figures tell me that Digitex currently has a much smaller user base and has not yet been adopted by the masses, but current users are able to circulate trades at a rate 61 times that of the average exchange. What this means is that the current users on the DFE are simply circulating their tokens at a much quicker rate than could be possible on fee-paying exchanges. As a direct result, the token velocity of DGTX on the Digitex Futures exchange will be much higher than comparable exchange tokens.
As mentioned, with such a low Open Interest relative to the top 10 exchanges, it is obvious that Digitex has not yet reached mass adoption. However, when it does, it will be interesting to see if the 24-hr trading volume grows proportionally to Open Interest. If it does, the DFE will be the most liquid exchange not only for scalpers but for large position traders who want to enter positions with minimum slippage.
ETHUSD Futures Market
The next market that Digitex will be launching is ETHUSD. Ethereum has been booming in anticipation of ETH 2.0 and it’s a great time for Digitex to provide a scalping paradise for this asset. This week has seen tremendous activity in the Ethereum markets where The Block recently published a comparison chart highlighting that trading volumes of ether are currently rising faster than that of bitcoin.
With DeFi hysteria in full swing, Ethereum 2.0 in testing, and massive Ethereum congestion, this comes as no surprise. The total amount of ETH locked in DeFi continues to increase, making Ethereum an exciting asset to trade in this environment. Soon, DGTX traders will be able to scalp ETHUSD markets with zero-fees, giving traders a great opportunity for making profit during the expected volatility.
Digitex Trading API
With the launch of the Digitex trading API, users are now able to implement trading bots on the DFE. This has been long-anticipated by the community and will be a great addition to the fluidity of the exchange. Bots running on the trading API will create higher open interest and volume as traders do not need to be present at the computer to manually trade.
Most traders will top up bots with a set amount of cash, typical recommendations in the region of 50,000 to 100,000 DGTX, meaning that the liquidity supply on the exchange will be running 24/7 for these traders, instead of just the hours that they typically get to set aside per week. Bots will also encourage HODLers and inexperienced traders to utilize a portion of their bag in their DFE trading account.
Fundamentally, this will drive participation of users, and as successful trading bots start to become well known, create a demand for the DGTX token. What will be of interest, is to see how many high-frequency trading bots test the waters with DGTX (as zero fees has the biggest impact on that particular trading strategy). Although bot development takes time, the release of the trading API means traders are now plugging in and testing strategies, and with some small fine-tuning, we can expect bots to be filling the books any time now.
Traditional Futures Markets
The real boom for DGTX will come with the integration of traditional markets later this year. Being one of the first exchanges to offer these markets will create a great competitive advantage for the DFE.
Presently, Digitex is trying to win over users in the BTCUSD market. A market where successful traders are already running strategies on their favorite exchanges and are comfortable in doing so. As such, Digitex’s biggest challenges going forward would be having to compete with exchanges who already have a loyal userbase.
However, offering unique markets that everybody will be interested in will certainly convert many traders to test the Digitex Futures exchange, and, once they see the ease of use and function of the exchange they will be converted just like the rest of us–which brings us to the next market that will be implemented on the DFE: GOLDUSD
With the current economic crisis, people have reverted to the safety of gold as their go-to store of value. Gold spot price is consistently breaking all-time highs and trading at a spot price over $2,000 per Troy ounce at this moment in time. The financial scale of gold futures contracts is astronomical and Digitex will soon offer access to this on the blockchain. The below graph outlines some metrics on the scale of this market, where the Left Y-Axis is measured in contracts, the Right Y-Axis is the spot price of gold and the X-Axis is the date.
A standard gold futures contract is for the delivery of 100 troy ounces of gold where gold is valued in dollars per troy ounce. Open interest here shows the total number of open contracts where each contract has a value of 100 ounces. Therefore, if gold is currently trading at a price of $2,000 per ounce, a single futures contract has a value of $200,000. This means that the Open Interest (Left Y-Axis) represents a dollar value range of $30Bn – $170Bn. If Digitex can attract even a fraction of a percent of this open interest it spells great things for this project.
Regarding contract size of gold, assuming you understand margin trading, you’ll understand that a trader can enter a position controlling a single gold contract (currently worth close to $200,000) with much less initial capital, somewhere in the region of $10,000 depending on leverage.
In recent years, futures exchanges have developed micro contracts for gold to facilitate market participation by individual or retail traders. These are typically contracts for 10 troy ounces, making minimum entrance somewhere in the region of $1,000.
These are typical values offered in the industry and may not represent what the DFE will offer regarding gold, however, it does highlight that entrance to gold has a huge potential to raise the bar for Digitex as first to market in this space. If Digitex were to maintain the industry’s minimum position sizes, as the first crypto exchange to offer GOLD-USD trading, Digitex could create a huge demand for the DGTX token by attracting bigger traders to the platform.
Being the first cryptocurrency platform to offer gold futures could be game-changing for Digitex and the DGTX token, as traders will soon be able to access Bitcoin, Gold, and more in a single exchange. And don’t forget about the cherry on top – Trading these markets with absolutely Zero Trading Fees.