Use Cases

A platform for trading perpetual futures on Bitcoin's fee rate (sat/vB) presents numerous use cases in an evolving Bitcoin ecosystem. With the rise of Bitcoin Ordinals, Runes, and other metaprotocols, the network is experiencing more transactions with urgency, leading to increased volatility in fee rates. This market offers traders, businesses, miners, and investors diverse opportunities - from speculation and hedging to arbitrage and market-making - allowing them to navigate and capitalize on the changing dynamics of Bitcoin's blockspace.

Speculation on Network Activity

Since February 2023, Bitcoin blocks have been consistently full, and the rise of Bitcoin Ordinals, Runes (fungible tokens), and other metaprotocols has introduced more transactions with urgency. These urgent transactions, often tied to time-sensitive events, create spikes in fee rates. Traders can speculate on these fee rate fluctuations by taking long positions when they anticipate congestion or short positions when they expect a decline.

Participate in Upcoming Network Events Without Direct Investment

With more metaprotocols and applications on Bitcoin, events like overallocated mints of Ordinals collections or Runes tokens often cause fee rate spikes. Traders aware of these upcoming events can profit without directly investing in the collections. By speculating on the anticipated fee rate surge, they can take long positions in fee rate futures to capitalize on the spike caused by the urgent demand for blockspace.

Hedging Transaction Costs

Businesses and individuals that rely on the Bitcoin network can hedge against increasing transaction fees. With the growing adoption of Ordinals and Runes, fee rate spikes are becoming more common, especially during periods of high network demand. Companies can use fee rate futures to lock in costs by going long on fee rates, offsetting unexpected surges and ensuring more predictable expenses.

Arbitrage Opportunities

The dynamic nature of the fee rate market, influenced by the urgency of transactions and new applications on Bitcoin, often creates price discrepancies between spot fee rates and the futures market. Arbitrage traders can exploit these differences by taking opposing positions in the spot and futures markets, profiting from the realignment of prices. This helps stabilize the fee rate market, improving overall efficiency.

Liquidity and Market Efficiency

The introduction of a perpetual futures DEX for Bitcoin's fee rate enhances liquidity and market efficiency, especially with the increasing complexity of transactions on the network. It provides continuous price discovery and allows participants to express their views on future network activity. Higher trading volumes lead to more accurate fee rate pricing, benefiting the entire ecosystem.

Portfolio Diversification

Investors seeking diversification can include fee rate futures in their portfolios. The fee rate market, influenced by network congestion, time-sensitive transactions, and the growth of applications like Ordinals and Runes, offers exposure to unique market dynamics not correlated with traditional assets, enhancing portfolio risk diversification.

Risk Management for Miners

Miners, who earn revenue from transaction fees, are directly impacted by the increased network activity from Bitcoin Ordinals and Runes. They can hedge against fee rate volatility by shorting fee rate futures. This strategy ensures a more stable income stream.

Yield Generation for Market Makers

Market makers can provide liquidity to the perpetual futures market and earn a yield from trading fees and funding rate payments. With the frequent fee rate changes driven by urgent transactions, market makers have more opportunities to profit from bid-ask spreads and funding rates, helping maintain market stability and liquidity.