BitMEX has launched a prediction market!

Jiger955

BitMEX, the U.S. exchange, has introduced a new derivative product called Prediction Markets. These markets allow investors to hedge or bet on prominent events in the cryptocurrency industry. The initial offerings include predictions on FTX customer reimbursement rates, the probability of approval for a Bitcoin spot ETF, and the likelihood of SBF (Sam Bankman-Fried) going to jail.

How do Prediction Markets work?
The operation of Prediction Markets is similar to all futures contracts on BitMEX but with a few differences:
- No leverage is provided.
- Margin and settlement are conducted in USDT.
- Payouts are based on limited prices ranging from 0 to 100.
- Maker fees are set at 0.00%, while Taker fees are set at 0.25%.
- Settlement can occur before the contract expiry date if the result or event takes place.
- The value of each contract ranges from 0 to 1 US dollar but is quoted in percentage terms.

Current Offerings
BitMEX has initially launched three products focusing on recent events of significant interest in the crypto community:
- P_FTXZ26: Prediction regarding FTX customer reimbursement rates.
- P_XBTETFV23: Prediction of SEC approval for a Bitcoin ETF, with 100 indicating approval and 0 indicating rejection.
- P_SBFJAILZ26: Prediction about whether SBF will be sentenced to jail, with 100 indicating imprisonment.

Example Explanation
Suppose, during trading, the price of the P_FTXZ26 contract, which predicts FTX customer reimbursement rates, is 20. This means the market predicts a recovery amount of $0.20 for every $1.00. A trader decides to purchase 1,000 contracts at this price, with a contract expiry date set for December 25, 2026.
When the market price of the P_FTXZ26 contract rises above 20, the trader can sell all 1,000 contracts to realize profits before the contract expiry date. Settlement of the contract will occur based on the publicly disclosed recovery rate defined in the contract specifications. Conversely, if the market price of the contract falls below 20, the trader can cut losses and retrieve their margin.
If the investor holds the contract until the expiry date and the settlement price is 30, they will receive: (Closing Price - Initial Cost) * Multiplier * Contract Quantity = (30 - 20) * 0.01 * 1000 = 100 USDT.
Based on the information available at the time of writing, the market anticipates an FTX customer reimbursement rate of 30%, believes there is a 24.5% chance of SEC approval for a Bitcoin spot ETF, and expects an 85% chance of SBF going to jail. It seems that sentiment is rather pessimistic!