What are Huobi & Huobi DM (Huobi Futures)?
Huobi DM (Huobi Futures) is a daughter company of Huobi, a Singapore-based cryptocurrency exchange. Founded in China, the company now has offices in Hong Kong, Korea, Japan, and the United States. In August 2018 it became a publicly listed Hong Kong company.
Following a 2017 ban on Bitcoin exchanges by the Chinese government, Huobi China continues to operate as a blockchain consulting and research platform.
Huobi DM (Huobi Futures) is then a digital currency derivatives platform under Huobi Group and uses a contract adopted with spread delivery, focused on futures, e.g. future contracts. That means when the contract expires, all open positions will be closed at the index-based last-hour arithmetic average price, instead of physical delivery.
What are crypto futures?
Crypto futures are a way to trade the future price action for crypto assets. Bitcoin futures are the most common crypto futures.
The Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) listed cash-settled Bitcoin futures trading products in December 2017. Cash-settled means these futures are not backed by actual Bitcoin. When the futures contracts expire, the value is paid out to the trader in cash instead of Bitcoin.
Each futures contract contains a specified amount of the traded product.
These futures contracts can be bought or sold at any time by the trader at any point within the contract time frame, as market supply and demand determine the price of the contract and its assets.
Futures allow you to take futures positions, along with their risks and opportunities, without having to take delivery of its assets.
A significant portion of futures trading involves trading these contracts multiple times during contract validity. For instance, trading Bitcoin futures often involves constantly adapting to changing market sentiment, buying and selling contracts based on Bitcoin’s spot price accordingly.
For example, if Bitcoin’s spot price is at $3,000 in December and a trader thinks it will fall to $2,000 by January, then he would sell a futures short contract. If the trader sold one Bitcoin futures contract short at $3,000 in December, and the price fell to $2,000 in January, he would buy the contract back and receive a cash payout of $4,000 (his initial $3,000 plus a $1,000 profit).
Huobi contract face value
Each contract represents a certain amount of digital currency. For example, the face value of a BTC contract is $100 and the minimum price change [MPC] in the order book is aggregated to $0.01. The face value of an XRP contract is $10 and the minimum price change in the order book is aggregated to $0.0001, etc.
Other currencies have a default face value of $10 with an MPC of $0.001 unless specified otherwise.
Expiration of contracts
Huobi allows for 3 types of contracts expiration-wise. Weekly, bi-weekly and quarterly. When do they expire?
a) Weekly contracts will be settled on imminent Friday.
b) Bi-weekly contracts will be settled on next Friday.
c) Quarterly contracts will be settled on the last Friday of March, June, September, and December.
Before opening a position, traders are obliged to select the leverage [more on Huobi DM (Huobi Futures) leverage later]. Once the leverage is selected, the weekly, bi-weekly and quarterly contracts should all use the same leverage.
Where is Huobi based?
Even though Huobi is originally a Chinese exchange, its headquarters and marketing department are located in Singapore. This is an understandable location due to the not-that-recent ban of cryptocurrencies in China.
Does Huobi have a giveaway?
Lucky you, reading this article before December 15th, 2019! There will be Huobi DM (Huobi Futures) anniversary giveaway in the total value of $50,000 in EOS currency. Huobi DM (Huobi Futures) this year celebrates its 1st year as a business under Huobi Group.
Make no mistakes, keep in mind that Huobi DM (Huobi Futures) is the part of the Huobi Ecosystem being around since 2013. Huobi DM (Huobi Futures) calls its celebration event a carnival. The carnival comes in two giveaway parts.
- Promote and win $20,000 in Airdrops – Rule: During the campaign period, users who share Huobi DM (Huobi Futures) birthday poster to twitter or to community groups can share $20,000 EOS airdrop together. Airdrop prize will be awarded to the user’s Huobi contract account on December 10th (GMT+8).
- Trade a contract and win $30,000 in prizes – Rule: During the campaign period, users who trade at least 1 contract of any futures on Huobi DM (Huobi Futures) can share $30,000 EOS airdrop together. Airdrop will be awarded to the user’s Huobi contract account within a week from the end date of this campaign.
Read more about the rules of Huobi giveaway in their official post on Medium, learn about Twitter DIY poster event or attend to AMA (Ask Me Anything) hosted by Huobi DM’s COO Tom.
Besides the above giveaways, Huobi DM (Huobi Futures) also have a Grand Master Competition which rewards it’s user big prizes like Tesla, Yacht BMW and more…
How safe is Huobi?
Let’s face it. Where is money, there are people trying to steal it. Especially in the field of cryptocurrency, we see an increased number of hackers dreaming about your funds, no matter where they are – in your cold storage, in your bank account or on your exchange. So important question comes to mind, how safe is Huobi? Can I trust it with my funds?
Huobi has been operating digital currency exchange since 2013, has been managing over 1 billion dollars while serving millions of users. Huobi has a professional distributed architecture and anti-DDOS attack system, 98% digital currency is stored in the multi-signed cold purse. Huobi believes in providing safe service to the users, ensuring accounts and assets are safe with their risk control system.
But is it enough?
How does Huobi ensure the safety of assets when you trade?
When you buy coins from a merchant, Huobi freezes merchants’ coins, and it is after you proceed with payment, the coins will be released.
But that‘s not all. Only certified merchants are allowed to advertise on the website, assuring you won’t get the bait to the scam when purchasing OTC.
There are two types of merchants on Huobi, certified merchant and super merchant. As you have guessed it takes even more caution and even more secure certification to become super merchant, providing yet another safety layer.
Huobi provides additional services, such as all-time monitoring of vendors and their purchases to make sure every transaction is secure. In order to make sure your transactions are safe, Huobi will escrow the cryptocurrency during the transaction, lock deposits of the sellers, and provide 24/7 online customer service. What else does it offer?
1. Security of cryptocurrency
In order to make sure the ordered cryptocurrency is safe, Huobi locks the crypto in order, till the process is completed, then the buyer gets the crypto.
2. Security of the counterparty
3. Security of the customer service
Huobi claims to provide 24/7 online customer service. At the time of writing this article, customer care is a chatbot, so we are not particularly sure if this is what was meant in Huobi’s statement. To the platform’s defense, it is a smart bot. Yet our questions as “Where is Huobi based“ or “What safety measure it implements“ were left unanswered.
Why trade futures with Huobi DM?
There are 3 reasons why to trust Huobi with your funds.
1. It is the leading derivatives platform in the crypto field
2. It has a strong risk control system
3. It provides investor protection
Leading crypto derivates
According to CoinGecko.com Huobi ranks as No 8 best platform out there, and as No 6 with 24h normalized volume traded as of the day of writing this article, 9th December 2019. The trading platform furthermore has an awesome Trust Score of 9/10.
Huobi DM (Huobi Futures) are then a part of a large family of Huobi products spreading worldwide.
Huobi DM (Huobi Futures) risk management
Huobi DM (Huobi Futures) risk management breaks down into 3 major systems.
a) Multiple limits for risk management
– Order limit: Limit orders are to prevent users from manipulating the market. For instance, an anonymous user using illegal bots to place orders to drive price the way he intends to gain profit or damage others.
– Position limit: Limit positions of the individual user and the gross positions of the whole exchange.
– Price limit: Dynamic basis price limit & Rigid price limit.
b) All-day long monitoring
– Huobi experts monitor in real-time contract prices and index prices, to be able to predict and prevent a problem before it struck users. Huobi uses modern AI models to see and improve the monitoring of behavioral patterns that predict such situations.
– Real-time monitoring of big position users or several users as if their margin ratios simultaneously turn too low to prevent coordinated „attacks“ from individuals or groups of individuals with too high purchasing power.
– Real-time monitoring of abnormal deals and positions, again using AI models.
c) Ascending margin requirement
– Huobi DM (Huobi Futures) utilizes a margin mechanism with ascending tension. That means the bigger position trader has, the higher-margin requirement there is for him. This measure is fully justifiable to prevent big clawbacks driven by big positions.
Huobi Security Insurance Fund has 20,000 BTC as the special security insurance fund to cope with extreme security incidents. The fund is to be used as payment for asset losses that weren‘t caused by users’ own reasons. The fund’s value translates, as of today’s BTC value, to 133 mil EUR.
Huobi, furthermore, has Risk Management Insurance Fund for each cryptocurrency to cope with unfilled liquidation orders losses and utilizes a “circular brake mechanism“, which is designed to help prevent traders from losses due to unnecessarily forced liquidation caused by contract price excessive deviation from the spot index price.
Leverage your futures
Leverage is a common financial tool. It amplifies risks and returns, with both profit and loss being amplified. After using leverage profit and loss are decided not by a margin, but by notional value after leverage amplification.
For example, if BTC is $5,000 and a trader chooses to use the leverage of 10x for a margin of 1 BTC, it enters a long position worth 10 BTC. If BTC price rises by 1% from $5,000 to $5,050, trader gains from 10x leverage $500 profit from a long contract.
If the trader chooses 1x leverage with 1 BTC as margin, he can enter a long position worth only 1 BTC. So when there is a 1% market increase, he earns only $50 (price per BTC increases still from $5,000 to $5,050).
Comparing 10x to 1x, there is a tenfold variation in terms of profit gained by the trader. Keep in mind that leverage amplifies both profit and loss. With the right turn, you can earn more using leverage, but turn wrongly, and you lose more too.
Through the margin mechanism, you can leverage your investment to the whole new level, to trade large notion values.
So how much, you ask, can we leverage our investments with Huobi?
With the expiry of weekly, bi-weekly and quarterly periods available, traders can flexibly choose 1 multiple, 5 multiples, 10 multiples, and 20 multiples.
What are Huobi DM (Huobi Futures) trading fees?
Huobi DM (Huobi Futures) scales your fees as you grow. Small scale traders will be happy to enjoy close to zero trading fees, while large scale traders will be able to reach minus fees.
But first things first. Huobi has one fee structure for BTC and different for other cryptos. Also, it obviously distinguishes Maker, Taker and Delivery fees, and separates their clients into several groups. The very basic fee structure looks like this.
|Trading pair||Huobi DM (Huobi Futures) Fee Structure|
|Maker Fee||Taker Fee||Delivery Fee|
Advanced fee structure utilizes customer tiers – Tier S, Tier 1 and Tier 2. It looks like this:
|Huobi DM (Huobi Futures) Market Maker Fee Structure|
|Trading pair||Tier S||Tier 1||Tier 2||Delivery Fee|
|Maker Fee||Taker Fee||Maker Fee||Taker Fee||Maker Fee||Taker Fee|
Huobi DM (Huobi Futures) also provides for its frequent traders VIP fees based on the monthly traded volume. There are in total 7 VIP levels, starting at the lowest VIP 1 for traders with monthly traded volume over 25 million USD.
The highest VIP level is 7 for clients reaching over 500 million USD in a 30-day cycle.
|Huobi DM (Huobi Futures) VIP Commission Preference|
|VIP Level||Last 30-day trading volume||Maker Fee||Taker Fee||Delivery Fee|
|LV1||< 25 mil USD||0.020%||0.030%||0.015%||0.05%|
|VIP 1||> 25 mil USD||0.015%||0.030%||0.015%||0.05%|
|VIP 2||> 50 mil USD||0.010%||0.030%||0.015%||0.05%|
|VIP 3||> 100 mil USD||0.005%||0.025%||0.015%||0.05%|
|VIP 4||> 150 mil USD||0.000%||0.025%||0.015%||0.05%|
|VIP 5||> 300 mil USD||0.000%||0.020%||0.015%||0.05%|
|VIP 6||> 400 mil USD||-0.005%||0.020%||0.015%||0.05%|
|VIP 7||> 500 mil USD||-0.005%||0.020%||0.015%||0.05%|
Oddly enough we didn’t find any difference between VIP level 6 and VIP level 7, aside from qualification criteria. Is there missing information? Or error in the official press? I guess we will have to wait to find out.
Huobi DM (Huobi Futures) is a daughter company of Huobi, founded in 2013 in China. Nowadays the company is based in Singapore, yet has offices all around the world.
The Huobi‘s platform provides crypto futures contracts on 27 trading pairs (9 cryptocurrencies with 3 expiry periods) and leverage options from 1x to 20x. Contracts on the platform are weekly, bi-weekly and quarterly.
It uses modern technology to ensure the safety and comfort of all interested parties while providing a safety net in case something goes wrong to the value of 20,000 BTC.
It is not that long ago a standard crypto trading fee was around 5%. Now Huobi DM (Huobi Futures) has a business model built around little fees, starting at 0.05% going all the way down to -0.013%. Fees are set based on traders‘ trading volume. There are in total of 8 volume-related categories. Level 1, and VIP 1 – 7. To qualify for VIP 1 you need to reach over 25 mil USD in monthly trading volume. VIP 7 will then come at the cost of 500 mil USD traded monthly.
Interested in trading crypto futures? Join Huobi now!