Today is a good day to update our readers on the BitOoda BTC Difficulty Swap Market. Two weeks ago, we were very pleased to be able to get a two-way on this market for our mining clients. We are now in the process of working with ICE Trade Vault to make sure this swap can be reported into an SDR (Swap Data Repository). Once the back-end is completed on ICE’s end, BitOoda will be able broker these swaps for our clients. We are always looking for more market participants that could help in providing liquidity for this contract.
Since the Difficulty adjusted on Sunday the 24th, I would like to walk through an example of how this trade could have been executed and settled.
Back on 3/10/19, the markets we got for the BTC Difficulty Swaps were:
D+1 (~3/24/19) 5.8 / 6.3 10 contracts up ($10k notional)
D+2 (~4/07/19) 5.8 / 6.3 10 contracts up ($10k notional)
For reference, as of 3/10/19, the Difficulty (D+0) was ~6.07 (6,068,891,541,676 to be exact).
If you purchased the D+1 contract and paid 6.3 for 10 contracts, this would mean that you are long $100,000 USD at the difficulty 6,300,000,000,000 (L). On 3/24/19, the D+1 contract would expire and settle 6,379,265,451,411 (D+x). **As a data point, from March 10th to March 24th, the difficulty rose 5.11%.
To calculate the settlement and payment for this transaction, this is the formula used:
((D+x) — L) / L * 100% = % Increase in value
(6,379,265,451,411–6,300,000,000,000) / 6,300,000,000,000 * 100% = 1.2582% Increase
Since the initial investment was $100,000, a 1.2582% increase in value means the buyer would have made $1,258.18.
I hope this walk through was helpful as you consider entering this market as a hedger or liquidity provider, and we will update you as to when ICE Trade Vault is set up and this BTC Difficulty Swap is fully ready to trade.