CoinFLEX: Who are we, where are we going, and why?

My Origins

I decided 6 years ago (in 2012) that bitcoin exchanges were the most fascinating problem in the world to solve and that I wanted to devote all my efforts and energy to the space of liquidity in the “bitcoin industry”. Simply nothing seemed as fascinating as a currency with the potential to become the next global reserve currency, used for payments everywhere. Back then, there was no “crypto Industry” because it was just bitcoin. In my first few months of bitcoin in 2012, I had a front row seat to multiple exchange hacks, shutdowns and failures — names of which most people these days don’t remember: Intersango, Bitfloor, Bitcoinica. After seeing these failures, I co-founded Coinfloor, the first UK bitcoin exchange. Our focus was on security and we operated with a perfect track record of 100% cold storage, zero hacks and regular blockchain based audits of balances.

Our Origins

CoinFLEX is owned, operated, and led by a group of folks dedicated to a singular mission. My cofounder, Sudhu Arumugam, traded on the floor of the London Finance Futures Exchange for leading proprietary trading firm. He’s been a partner at prop firms and hedge funds and is absolutely obsessed with derivatives and crypto. Our team is globally distributed, hiring selectively and extremely focussed on technology to ensure we can adapt quickly, build new derivatives products, and scale customers/volumes.

Trading Technologies (TT) is a 25 year-old company and core infrastructure for futures trading worldwide, facilitating over a trillion dollars of notional volumes every day. They are a CoinFLEX shareholder, trading front-end provider and will provide our markets to their non-US-based global client base. Mike Unetich is head of TT’s crypto division and in charge of the partnership with CoinFLEX. He is a successful former trader, entrepreneur, and product builder — an embodiment of CoinFLEX’s DNA. He built his own trading firm as well as co-founded TickIt, the trading software company that invented TT’s Algo Design Lab (or ADL).

ICE and CME, the biggest futures exchanges in the world started out by making sure that big traders and market makers were shareholders and owners of the exchange. Alameda Research, Amber AI, B2C2 and Grapefruit Trading are major market makers in the space, part of the global effort to ensure that when people come to buy or sell crypto and derivatives, they can find someone on the other side to take their order. As shareholders of CoinFLEX, they are dedicated to ensuring our liquidity is tight, deep, and consistent.

Mike Komaransky has been an active participant in crypto markets since 2010, Roger Ver has approached Bitcoin and crypto with the kind of dedication and fervor that few can match. Dragonfly Capital’s LP base is influential and vast and they are attempting to bridge the East and West, an extremely valuable feat.

The Magical, Transforming Power of Futures

Many players have dominated the bitcoin futures space, the first being ICBIT, then following 796 Exchange and for a long period, OKEx. Even today, OKEx dominates the non-BTC derivative volumes while BitMEX has the majority of BTC market share.

Futures seem magical because they allow two players to decide to buy and sell something and because there is an exchange handling margining, the players can skip the annoying and expensive step of actually fully settling the transaction, or at least delay it until later on.

This is a risk-taker’s paradise because you can massively increase the amount of buying or selling power you have at your disposal. Most people in crypto today view derivatives as completely speculative instruments, but as mentioned in an earlier post, futures can transform the potential for crypto and enable it to be used for so much more than just price speculation. The impact of increasing the capital efficiency of crypto simply cannot be understated.

Together, we are building an infrastructure that makes crypto more capital efficient than fiat currencies for all kinds of transactions, loans, investments, etc. Once this happens, adoption of crypto will not just be possible, but in many places it will be a legal requirement, as companies have law-related fiduciary duties to shareholders to maximise profits and minimise costs.

CoinFLEX’s Goal in the Space

CoinFLEX aims to become the dominant non-US-serving crypto derivatives exchange. A small part of our strategy is to recruit customers who are already trading on BitMEX or OKEX today. However, we believe that the superiority of physically-delivered futures should result in the crypto-futures volumes growing to 10–20X larger than spot volumes today. Right now, spot volumes for the biggest coins are $2–4 billion dollars a day in aggregate. We believe that the physically-delivered futures market should be trading $20–40 billion dollars, at least, in current market conditions. We want to increase the crypto derivatives market and capture the majority of daily volume as a result. We think that retail customers will be one of the main drivers of this next phase of crypto derivatives growth.

Why are we doing this?

We want to make money and create a hugely profitable and thriving business in and of the crypto world. We want to transform by enabling financial freedom, openness, and accessibility around the world.

We think that all major crypto exchanges today are too expensive and have products which are suboptimal for serious traders, commercial users of crypto, borrowers and lenders. We understand that crypto’s vast, globally-reaching potential for the world can be accelerated through derivatives and that any acceleration is positive for humanity.

The standards in crypto derivatives today are low and we believe there is a chance to build something enormous. This space provides fantastic opportunities and it will be a community effort for us to get us where we need to go. As long as you are not in a prohibited country, we would love for you to trade on ‘flex and be part of our success. Stay tuned for CoinFLEX’s plans and how you can get involved in them in 2019.

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