Binance is crazily launching contracts, just like a "Death Note," writing down who will die?

Author: Professor Suo Says

"What is the purpose of launching contracts?"

Recently, or rather over the past year, Binance has launched a large number of contracts. I haven't counted the exact number, but it is highly likely that it has surpassed many previously leading "derivatives exchanges."

Currently, many exchanges primarily focus on "contracts" and rarely list spot trading. The reasons are generally similar: for assets with high market capitalization, listing spot trading makes it easy for users to take over, while with contracts, there is no fear because users can short or long.

Thus, including but not limited to Binance, OKX, and Bybit, the number of contracts they have launched far exceeds that of spot trading, and the reasoning is the same.

Moreover, the main point is that for spot trading, you may really need to "reserve spot assets" for users to withdraw, while "contracts" do not require this at all, as they are not subject to "physical delivery."

From a very observational perspective, exchanges are essentially places that provide "trading," so as long as they provide trading pairs, they earn transaction fees. Therefore, they will list whatever generates fees, and whatever can increase "fee income" is what they will pursue.

So, isn't "leverage" also a source of income from fees?

From the perspective of an "exchange," this is a normal operation, as the goal is to earn "trading fees." Unless you insist that "exchanges" profit from customer losses, then there are more interpretations, and one can rely on imagination to think about it; I won't elaborate further, as it's unnecessary.

"What is the greater impact of spot trading?"

This actually explores the question of why spot trading has a greater impact on exchanges or prices.

When trading spot assets, the "reserved spot assets" for user withdrawals can lead to a lot of liquidity being locked in the exchange, and many users may not necessarily buy or sell them, which can result in the actual market capitalization being much lower than the theoretical market capitalization.

If an exchange lists spot trading, it means it must have spot assets, as it needs to ensure that there are spot assets in the exchange's address before opening trading, and these addresses are all public.

Therefore, the positive impact on prices is far greater than that of "contracts," and most importantly, listing spot trading can reduce "liquidity." Here, "liquidity" refers to many "spot tokens" being locked in the "exchange."

Especially when many spot tokens are monitored on-chain, if someone discovers that a certain exchange has a very low token balance, they may force a short squeeze by withdrawing, prompting the exchange to buy tokens. This has happened with $REEF, where there weren't enough tokens in @gate_io, leading to @dotyyds1234 forcing a short squeeze 😂.

"The Battle for Liquidity"

In fact, the main relationship between contracts and spot trading lies in the debate over "liquidity."

After launching contracts, liquidity is very good, and since there is no need to buy "spot assets," the actual impact on prices is "not significant." It mainly increases through subsequent "arbitrage" trends, so many people use "contracts for arbitrage," which leads to very good "liquidity."

Moreover, many tokens show that the trading volume of spot trading is far lower than that of contracts.

In fact, because of contracts, one can make money whether the price goes up or down, which further enhances liquidity.

For example, with 10,000 USD, in the contract market, it could turn into a cash flow of 200,000 USD. For the exchange itself, this is just a way to extract fees; whoever can generate more cash flow is favored.

In contrast, spot trading, especially in the current market, does not have good liquidity. Recently, the altcoin market has been declining, and for many exchanges, spot trading has seen a big bullish candle followed by a continuous bearish trend. Few can continue to rise after being listed on exchanges, and even wealthy VC tokens struggle to do so. Can meme coins relying purely on concepts achieve this?

Thus, the option to make money even when prices fall can only be through contracts.

So, from the perspective of allowing "users to make money," there is actually nothing wrong with launching "contracts."

"Epilogue"

For those holding a significant amount of positions, if they launch contracts on Binance, it can provide ample opportunity to offload. However, with spot trading, it may not be possible to sell everything.

Because the depth of spot trading is not very strong, and the trading volume is not large, if you rely solely on a large sell-off on-chain, it can be quite challenging. If you directly open a contract, there is a high probability that you can enter the market effectively.

This reminds me of $ARKM, where a group member held at least 10% of the total circulation. They couldn't sell it off through spot trading, so they opened a full contract and gradually sold off, successfully completing their exit.

Thus, there is actually no conflict between spot trading and contracts; it depends on how you use them or how you understand liquidity.

For most assets, the better the liquidity, the faster they fall; the worse the liquidity, the better they rise.

For example, consider assets like NFT and BRC20.

Think about it: with so many fees, exchanges always want to get a piece of the pie. If they don't list spot trading, they must list contracts, right?

Ultimately, it's all business. They cannot control prices; they can short, and everyone can directly buy on-chain to trigger a short squeeze 😂.

Those with good liquidity will always be controlled by "market makers."

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