A crypto derivatives exchange is launching physically-delivered futures contracts that will be settled based on whether Facebook’s Libra does or does not launch in 2020.
The new offering is slated for launch by the Seychelles-registered CoinFlex exchange via an “Initial Futures Opening” (IFO) on Oct. 24.
The IFO concept: betting on tokens that don’t exist yet
CoinFlex’s IFO will set the price of a futures contract at 30 cents — reflecting a roughly 30% likelihood that Libra will launch by December 2020.
The exchange’s CEO Mark Lamb has told Bloomberg that the price had been set after consultation with various investors and traders.
Once 30 minutes since the IFO’s launch have lapsed, traders who have not yet participated will be able to trade the contract at prices that better align with their individual estimation of how likely Libra is to launch by Dec. 2020, or the contract’s settlement date.
If a trader deems it 70% likely that Libra will be operational by the time of the contract’s expiration date, they will pay 70% of one Libra token. If their judgement is correct, they will receive one coin at settlement — thereby having bought the token at a discounted rate. If wrong, traders will receive nothing, thus losing their investment.
Traders will also be able to bet against Libra launching in 2020, with gains for both long and short trades to be capped at $1.1 per Libra to account for fluctuations in the value of the currencies backing the token, revealed Lamb. He told Bloomberg that:
“Facebook has the ability to rival the entire global banking system from day one, but, because of that fact, when that first day will be is far from certain. The political backlash has been brutal, and it’s anyone’s guess if Facebook will get this over the line.”
A “prediction market” for Libra
Su Zhu, the CEO of Singapore-based foreign exchange and crypto fund Three Arrows Capital, told Bloomberg that his platform was also considering markets for Libra, noting:
“This can be interesting if it gathers liquidity as its kind of a prediction market on Libra.”
Amid the robust regulatory pushback, Libra’s creators have given increasingly mixed signals as to the coin’s eventual expected launch date.
In mid-September, Bertrand Perez, the director general of the Libra Association, has said that the token should appear in the second half of 2020.
That same month, head of Calibra David Marcus has reiterated that a 2020 launch remains the goal, noting that the team behind the project would need to address all concerns adequately and to create a suitable regulatory environment.
Facebook CEO Mark Zuckerberg has meanwhile stopped short of committing to a timeframe, conceding that the project was potentially “very sensitive for society” and noting that, given the scale it operates at, Facebook must “work through the issues” thoroughly before Libra’s launch.
Hong Kong-based cryptocurrency futures exchange CoinFlex has received $10 million through a funding round.