Cointime

Cointime

Download App
iOS & Android

NFT 101: What Is NFT Perps Trading?

Validated Project

If you are an experienced NFT player, have you ever faced this dilemma? A blue-chip NFT that you like has seen a significant increase in value in a short time, and you want to lock in the profits, but you don’t want to sell the NFT you own, especially if it has rarity, and you don’t want to sell it for below market value. In this case, you have the opportunity to use NFT perp trading to profit.

In the hype of 2021, we witnessed a significant rise in the popularity and adoption of NFT technology. This innovative technology garnered attention globally and was utilized for a variety of purposes, including art creation, photography, community access, and digital identity components such as profile pictures. NFTs were integrated into various aspects of our digital lives, showcasing their versatility and potential impact on the way we interact with digital assets. According to data from NFTScan and DappRadar, the total NFT transaction volume on-chain in 2021 exceeded $21 billion.

NFTScan Data

NFT Perpetual Futures (NFT Perps) is a new type of derivative that allows investors to trade NFTs with better liquidity. NFT perpetual futures are similar to traditional cryptocurrency perpetual futures, except that their prices track NFT collections. NFT perpetual futures offer several advantages over traditional NFT spot markets, enhancing the trading experience:

Quick Access: NFT futures allow investors to enter and exit positions instantly without having to purchase the underlying asset or list NFTs on NFT markets, aggregators, or NFT automated market makers. This is beneficial as it reduces the workload of storing or transferring NFTs.

Hedging Opportunities and Two-Way Markets: Until now, NFT investors could only go “long” on NFT markets. By using NFT perpetual futures, investors can establish “market-neutral” positions by shorting the perpetual contracts while still enjoying the utility, community, and other benefits that NFTs provide. Additionally, it allows them to profit from negative catalysts for collections.

Leverage: So far, NFT investors can only use leverage by borrowing NFTs on NFT lending platforms. However, apart from causing friction (users must deploy borrowed funds into other trading activities), NFT lending may sometimes lack capital efficiency as it requires having complete NFT assets in inventory to obtain leverage.

Flexible Scale: NFT perpetual futures allow users to gain exposure to desired NFT collections at any scale, as there is no need to acquire specific NFTs and pay their ask prices. Through this approach, users can trade $100 ETH worth of BAYC or $0.1 ETH worth of BAYC. This enables smaller holders to gain exposure to NFT collections they otherwise couldn’t access through spot trading. Additionally, it allows institutions and large collectors to trade at higher scales without impacting prices by sweeping the floor.

Introducing New Users: The aforementioned small-scale accessibility may attract more retail collectors and traders to the space, which could then onboard them into the broader blockchain ecosystem.

During the bear market period of 2022–2023, the NFT ecosystem witnessed several innovative developments:

On-chain NFT Options: These address hedging possibilities, and directional NFT market risks, and can provide contracts of varying sizes. However, options are a more complex product compared to the widely adopted perpetual contracts on centralized platforms. Furthermore, a lack of liquidity across different strike prices or expiration dates can cause friction.

Fractional NFTs: Fractional NFTs lower the barrier to entry for high-priced collectibles and enable trading in any desired fraction. Nevertheless, fractionalization comes with the following drawbacks:

  • Inefficient Capital Utilization: The fractionalization process requires users to purchase NFTs and lock them in a contract, leading to inefficient capital allocation.
  • Limited Substitutability: One NFT fraction is not equal to another, even if they belong to the same collection.
  • Restricted Liquidity and Scale: Building a liquid trading pool for a specific NFT may prove challenging, as mentioned earlier.
  • Governance and Redemption Complexities: NFT redemption may encounter friction as it requires consensus among holders.

NFT Automated Market Makers (AMMs): NFT AMMs address liquidity incentives, create more liquid markets, and support trading NFT collections in any size. However, they are still impacted by capital inefficiency as they require depositing NFTs into the pool. Additionally, NFT AMMs do not facilitate short selling.

Increased LiquidityNFT futures allow investors to enter and exit positions immediately without actually owning the NFTs. This can greatly increase the liquidity of the NFT market, attracting more institutional investors and traders to participate, and injecting more capital into the entire NFT ecosystem.

Enabling Short-Selling OpportunitiesTraditional NFT spot markets only offer long positions. NFT futures provide investors with the ability to take short positions, creating a two-way market, which is conducive to more efficient price discovery and hedging.

Driving Innovation and DevelopmentThe development of the futures market may bring more financial innovations, such as NFT options and other derivatives, providing NFT investors with more trading strategies and risk management tools, propelling the faster development of the entire NFT market.

Accelerating InstitutionalizationFutures markets operate in a more standardized manner, which is beneficial for the involvement of institutional investors. The inflow of institutional funds will bring more liquidity providers to the NFT market, pushing the market towards greater maturity and professionalism.

Overall, NFT perps introduce many advanced trading tools and mechanisms from traditional financial markets to the NFT market, significantly enhancing the depth and development potential of the NFT market.

NFTScan is the world’s largest NFT data infrastructure, including a professional NFT explorer and NFT developer platform, supporting the complete amount of NFT data for 24 blockchains including Ethereum, Solana, BNBChain, Arbitrum, Optimism, and other major networks, providing NFT API for developers on various blockchains.

Official Links:

NFTScan: https://nftscan.com

Developer: https://developer.nftscan.com

Twitter: https://twitter.com/nftscan_com

Discord: https://discord.gg/nftscan

Join the NFTScan Connect Program

Comments

All Comments

Recommended for you

  • a16z partner: Americans have accepted digital assets, but current regulatory approaches limit innovation and privacy

    Web3 supporter and a16z partner Chris Dixon (cdixon.eth) posted on social media that in the next two weeks, the House of Representatives will vote on the most important crypto legislation to date, the "21st Century Financial Innovation and Technology Act" (FIT21). We have long called for clear regulation to protect consumers and innovation, and the FIT21 bill will achieve this.

  • Fuel Network DeFi Protocol Spark Completes $1.5 Million Pre-seed Round of Funding

    On May 15th, Fuel Network's DeFi protocol Spark announced the completion of a $1.5 million pre-seed round of financing with participation from P2 Ventures.

  • A certain address may have lost assets worth about $4.3 million due to private key leakage

    According to CertiK monitoring shows that due to suspicious transactions, preliminary evidence suggests that the private key may have been leaked, and a total of approximately $4.3 million worth of assets have been transferred to the address 0x2705.

  • Tornado Cash developer's 64-month sentence unlikely to impact Roman Storm's US case

    The Dutch court has ruled that Pertsev, a 31-year-old, laundered $1.2 billion through Tornado Cash. A panel of three judges sentenced Pertsev to five years and four months in prison. The court stated in its final conclusion, "The court believes that legally and factually, the suspect, together with others, laundered Ethereum obtained through criminal means, and he has become accustomed to this money laundering behavior." Meanwhile, Tornado Cash co-founder Roman Storm's trial in the United States began on September 23. Last year, US prosecutors charged Storm and co-founder Roman Semenov with conspiracy to launder money, conspiracy to violate sanctions, and conspiracy to operate an unlicensed money transmission business. Semenov remains at large at the time of the indictment.

  • Wisconsin Pension System Holds $164 Million in Spot Bitcoin ETF Assets

    A government entity responsible for managing trust funds in Wisconsin, USA, disclosed in a filing with the Securities and Exchange Commission (SEC) that it holds over 2.4 million shares of BlackRock's iShares iBoxx $ Investment Grade Corporate Bond ETF (IBIT) and over 1 million shares of Grayscale's Bitcoin Investment Trust (GBTC), valued at approximately $100 million and $64 million, respectively. The filing suggests that the Wisconsin Retirement System may be investing in cryptocurrencies through these asset management companies.

  • RWA platform Re completes new round of financing of US$7 million, led by Electric Capital

    Re, a tokenized reinsurance RWA platform, has completed a new round of funding of $7 million, led by Electric Capital. It is reported that the project had completed a seed round of funding of $14 million at the end of 2022. Re's goal is to support $200 million in premiums by the end of this year.

  • Crypto prediction market Polymarket has raised $70 million in two rounds of funding

    Peter Thiel's venture capital firm, Founders Fund, is investing in the cryptocurrency prediction market Polymarket. A spokesperson for Polymarket stated that the company has raised $70 million in two rounds of financing, with the latest round led by Founders Fund. The company's supporters also include Ethereum co-founder Vitalik Buterin, and it has been attracting users to predict the outcomes of various events, with bets on the 2024 US presidential election becoming the most popular contract on its platform.

  • ChainML raises $6.2m in seed extension funding for community-governed AI platform, Theoriq

    ChainML, a Silicon Valley-based AI and ML development and research lab, has raised $6.2m in seed extension funding for its AI platform called Theoriq. The funding round was led by Hack VC and included participation from several other venture capital firms. The company plans to use the funds to expand its development efforts and continue building community-governed AI systems based on principles of social evolution and blockchain technology. CEO Ron Bodkin expressed excitement about the potential for unlocking new potentials for AI integration within the decentralized space.

  • Zeta Markets Raises $5 Million in Token Funding Round

    Solana DEX Zeta Markets raised $5 million in a new round of funding led by Electric Capital. Other investors in this round of funding include Digital Asset Capital management company, Selini Capital, and Airtree Ventures. Angel investors include Solana's Anatoly Yakovenko, Helius' Mert Mumtaz, Tensor's Richard Wu, Pyth's Genia Mikhalchenko, Wintermute's JMR Luna, and Bonk's Nom also participated in this round of funding.

  • Tornado Cash Developer Alexey Pertsev Sentenced to 64 Months in Prison

    On Tuesday, a Dutch judge ruled that Tornado Cash developer Alexey Pertsev was guilty of money laundering. The court sentenced Pertsev to 64 months in prison. In August 2022, Tornado Cash was blacklisted by the US government, and this is the first time the developer has been sentenced to prison in the Netherlands. At the time, the US Treasury Department claimed that Tornado Cash was a key tool for the North Korean hacker group Lazarus. The Lazarus group is linked to the $625 million hack of Axie Infinity's Ronin Network and other major cryptocurrency thefts.

Daily Must-Read

Popular Activities

Delysium $AGI & AI Private Yacht Party

Delysium $AGI & AI Private Yacht Party

March 27 - March 27
Seoul

Popular Tags

Cointime
News
Contents
RSS
Company