None of what follows should be construed as financial advice. Do your own research. Be aware that contract trading can easily incur huge losses.
What Is Bityard?
Bityard is a trading exchange. It allows users to buy or trade on the prices of cryptocurrencies and more traditional commodities (gold, crude oil etc). Bityard provides up to 100x leverage on margin trading and charges a transaction fee of 0.05%.
Complex Contracts, Simple Trade
Bityard seeks to differentiate itself from similar exchange providers (e.g. BitMEX, Prime XBT) by simplifying the contracts trading process and providing a quicker and easier sign-up procedure. Bityard aims to bring 'the ultimate simplified trading experience' to customers. With that in mind this article aims to be the ultimate simplified guide to trading on Bityard.
Spot Trading and Contract Trading
Before trading on Bityard it is essential that you understand the differences between spot trading and contract (futures) trading.
Spot trading is simple buying or selling of an asset. Many readers will be familiar with trading exchanges (such as Coinbase Pro, Binance) that provide this service for buying and selling Bitcoin or other cryptocurrencies. Bityard too has an exchange window providing spot trading.
Contract trading is something very different. Elsewhere its known as CFD (Contract For Differences) trading, margin trading, options trading or futures trading - there are a whole host of names but, in terms of betting on cryptocurrency assets, they work much the same way. There are two key points to note:
1. With contract trading no actual trade of the asset takes place.
Rather the Bityard exchange establishes a contract between two parties (for which it takes a trading fee of 0.05%). This is like a bet on the future price of the asset-pair and no trade of the underlying assets actually takes place. Bityard, as the Exchange provider, fulfils the agreement and makes good on the contract.
2. Contract trading works on margin and leverage
Crucially important, margin is the collateral that you provide to the contract and leverage is capital you borrow from the exchange to multiply the potential profit/loss on the contract. Contract trading is thus a high stakes field. Leverage (on Bityard it can be as high as 100x the size of your margin) has the potential to sizeably expand or diminish your capital.
Contract trading is high stakes gambling on crypto-assets. It comes from the world of high finance. Contract trading can be used speculatively (a) to make large bets to dramatically increase one's profits, or more cautiously (b) to hedge risks and lock in guaranteed profits. For example, if you're buying Bitcoin at a spot price then it can be a safe and sensible move to take a short position on the asset, thereby ensuring that if the price falls significantly your potential loss is limited.
Traditionally, setting limits enabled farmers, producers and businesses to guarantee a minimum or maximum price at which they would either sell or buy commodities at in the future. Contract and derivatives trading has been much abused in financial markets. Excessive speculation in the US housing market by investment banks is widely seen as the cause of the 2008 global financial crisis.
The introduction of futures or contract trading to the internet, offering individuals modest transaction fees and sizeable leverage, is of significant import. It suggests a radical transformation to the make-up of the financial system, much sought after by many (I have long looked for an affordable way to speculate in the financial markets), and significantly presaged by the development of Bitcoin and blockchain technology. The US SEC (Securities and Exchange Commision) has quite fiercely attempted to block and regulate trading activity on such exchanges as Binance DEX but it feels as if change is afoot.
Bityard provides leverage of 100x to contract trading on Bitcoin (it's significantly reduced on all other more volatile assets). The potential to magnify your margin (outlay) by 100 times, or magnify your debt 100 times is significant and should come with warnings. Speculators are encouraged to begin with spot trading and at all times be aware of the risks they are taking. Cryptonator's has written an informative article on the dangers that novice traders face from industry insiders with far faster computers and years of experience or whales with the ability to move markets. Before speculating on Bityard I urge you to read that article.
Trading is a competition to see how much OPM (other people's money) one can collect. Exchange platforms facilitate these wealth transfers, which provides insulation between the participants and de-personalizes trading activity. The fact remains: trading the crypto-market is war and nothing else.
The Bityard Interface
The menu at the top of the screen includes the three main exchange windows: Contract, Derivatives and Spot Trading. Contract and Derivatives trading works the same way. The Contract Exchange shows major cryptocurrency pairs while the Derivatives exchange offers prices on the contracts of real world commodities such as Crude Oil, Gold or the Nasdaq 100 stock listing.
Spot trading is for immediate buying and selling of actual cryptocurrency assets. This is why on the right of the window in the spot trading exchange we see an order book. These are actual trades being made. Bityard doesn't provide a Demo mode for Spot Trading so we will focus on Contract Trading. You can switch between Live trading and Demo trading using the simple switch dialogue at the top right of the window.
The Bityard interface provides a panel for setting up your order on the right of the exchange window. The mimimum setting you need to enter to run a trade is Margin (the collateral you are putting up on this spread position). Leverage, Take Profit and Stop Loss are all easily adjusted here but default settings are assumed.
Margin is the collateral that the speculator or trader provides as a deposit to Bityard exchange for the purposes of the contract.
Leverage is a loan provided by Bityard to magnify the margin's power in a market. Bityard offers leverage of 100% in some instances. This is quite a substantial amount, especially in the field of cryptocurrencies, many of which remain highly volatile and can rise or fall as much as 20% a day.
Take Profit and Stop Loss
By taking a position on the changing price of an asset, you need to specify the limits of the contracted agreement. This includes setting Take Profit and Stop Loss points. You declare the price of the asset for which you will win the bet, in effect, and take the profit. You also need to define a Stop Loss point at which you will lose the bet and pay the losses. You are however free to close out on the trade at any point before these limits are reached.
So the procedure of taking a trade or position on Bityard is as follows:
- Set your Leverage (default is usually between 20% and 40%).
- Set your Take Profit and Stop Loss markers (large defaults are set of 300% and 90% respectively).
- Enter your margin amount.
- Press Buy or Sell.
Demo Contract Trade
In the following example I am trading in Demo mode on the Contract exchange for BTC-USDT. I am entering the trade setting a margin of 100 USD. I have left Leverage at the default 40X and similarly assumed the defaults for Take Profit (TP Ratio) and Stop Loss (SR Ratio).
In my demo trade I click the green Buy button to buy the current Bitcoin price with 100 USD. I confirm I want to make the trade. The contract is immediately placed and it shows up in my (Open) Positions below the main price tracker window. You can close out on a position at any time by clicking Close or adjust the parameters of the TP and SL ratios in Settings. Further, the orders will close overnight unless you have specifically set it to ignore this setting.
Exploring The Maths of Contract Trading
An Order's position = (Margin * Leverage)/Price
I have bought BTC-USDT with 100 x 40 at an opening price of 18,264.18. This is equivalent to 0.219615267 BTC.
I adjust the settings to Take Profit. I stipulate that if the Bitcoin price reaches 18,300USD I'll close the trade and take the profit...
...but then I get a bit nervy as the price tanks and after an hour I close out my trade.
I sell BTC-USDT with 100 x 40 at a closing price of 18,154.89. This is equivalent to 0.220326314 BTC.
While the Bitcoin price has dropped less than 1% in this short trading time, I have lost 23% of my margin stake of 100 USD. I have lost $23.
My margin x leverage was 100 x 40 = 4000 USD.
My BTC-USDT opening price was 18264.18. I bought 0.219 of 18264.18 = 3999.85542 USD.
My BTC-USDT closing price was 18154.89. I sold 0.219 of 18154.89 = 3975.92091 USD.
My Loss was 3999.85542 - 3975.92091 = 23.93 USD.
Had I spot traded (bought and sold BTC-USD) with 100USD I'd have lost about 60 cents ($0.6USD). The 40x leverage ultimately transformed my losses to $23.91 USD.
This has been an extensive write-up which has eventually focused on contract trading (with leverage) on Bityard exchange. It has been important to highlight the significant risk and reward implicit in such margin trading as this. I also needed to focus at length on the radical differences between the (spot) trading of crypto assets, that we are used to exchanges providing, and contract trading, which is fairly new to the crypto community and greatly multiplies the potential risk/reward.
While contract trading can, with care, be used to support and insure sensible investment strategies, for speculative purposes you might well call it gambling. In helping bring contract trading to the public, Bityard is adding some exciting opportunities for cryptocurrency asset speculation.