This notice is meant to clarify common questions users have about the BitMEX 30 December 2016 Zcash / Bitcoin futures product.
When Does Zcash Spot Begin Trading?
The genesis block is scheduled to launch at 13:00 UTC today. Many large digital currency spot exchanges have indicated they will open Zcash trading shortly afterwards.
Due to its mining reward system, the supply of Zcash will be severely limited. As a result it may be very difficult to buy physical Zcash. If you instead desire economic exposure on the long or short side, the BitMEX Zcash futures contract may be suitable.
Can You Buy Zcash on BitMEX?
BitMEX only offers a Zcash / Bitcoin futures contract, ZECZ16. Users cannot buy and sell actual Zcash on BitMEX.
ZECZ16 Contract Details:
Contract Value: 1 ZEC Quote, Margin, and Settlement Currency: Bitcoin Settlement Index: To Be Determined Expiry Date: 30 December 2016 12:00 UTC Leverage: 2x
What Exchange Will Be Used for the Settlement Price?
By 1 December 2016, we aim to announce the settlement exchange(s). We will base our decision on which exchange(s) are leading the market in terms of Zcash / Bitcoin trading volume. This decision is at our complete discretion.
Is ZECZ16 Freely Tradable?
From now until 12:00 UTC, the price of ZECZ16 may not go below 0.391884 XBT (Limit Down), or above 1.175652 XBT (Limit Up).
After 12:00 UTC, all trading limits will be removed. ZECZ16 is then free to trade at any price where buyers and sellers meet.
How Is ZECZ16 Valued?
All long and short positions in ZECZ16 will be valued using the last traded price.
What Happens During Liquidation?
ZECZ16 is classified as highly speculative. As a result, it is margined according to the Auto-Deleveraging System.
Zcash is the most anticipated new digital currency of 2016. Zcash aims to create a form of electronic money that is truly a bearer instrument.
One impediment to Bitcoin’s use as electronic cash is that all transactions are viewable on the public blockchain. Bitcoin’s fungibility has become an issue as a result. Some people and businesses (mainly exchanges) will not accept Bitcoin if certain addresses touched or will touch those coins in the past or future. Transaction censorship goes against the core of values of Bitcoin.
Zcash is the latest coin that attempts to create a digital currency where no knowledge of the inputs or outputs of the cryptographic signature are require for verification. This is called a Zero-Knowledge Proof. DASH and Monero are two other digital currencies that attempt to solve the same problem using different cryptographic methods.
The hype surrounding Zcash is deafening. The Zcash development team is held in high regard. They have secured investment from notable Bitcoin venture capital firms such as Pantera, Fenbushi, and The Digital Currency Group. Bitcoin luminaries such as Roger Ver, Erik Voorhees, Barry Silbert, and Li Xiaolai have invested their personal capital. Conformational bias is important in evaluating why investors choose one project over another. If the leading figures of the Bitcoin industry are investing, it must be good, right?
Unfortunately Zcash is not holding an Initial Coin Offering (ICO) to distribute ZEC amongst investors. ZEC is the three character currency code for Zcash. ZEC will be distributed through mining rewards just like Bitcoin. Unlike Bitcoin that was an unknown and unproven concept when it launched, the genesis block of ZEC is highly anticipated. The short supply of ZEC paired against ravenous demand, has and will lead to a price spike.
A ZEC block is produced every 2.5 minutes and 12.5 ZEC are awarded to the miner who creates that block. Bitcoin currently produces blocks every 10 minutes, and the block reward is 12.5 BTC. The Zcash team opted for a “slow start” to the mining process. For the first 20,000 blocks (approximately 34 days), only 125,000 ZEC will be created vs. an expected 250,000 ZEC. That leads to an average 6.25 ZEC created per block.
On December 1, 2016, the block reward will revert to 12.5 ZEC per block. By January 1, 2017, the total supply will stand at approximately 348,200 ZEC.
The Zcash team took a total of $3 million worth of outside investment. In order to reward initial investors and pay for operational expenses, during the first 4 years 20% of all ZEC produced will go to the Zcash team and initial investors. The effective supply by January 1, 2017 will be 278,560 ZEC. I will use this as the total supply for the price predictions I will make.
In order to provide price discovery on the future value of ZEC, BitMEX launched the first and only trading product on the ZEC/BTC exchange rate. The ZECZ16 futures contract expires on December 30, 2016 12:00 UTC based on that day’s exchange rate for immediate delivery.
ZECZ16 allows traders to go long or short ZEC with up to 2x leverage. The contract’s listing price on September 15, 2016 was 0.024790 BTC, and now trades at 0.195 BTC, a gain of almost 700%. During that period, 8,590 ZEC (1,675 BTC, $1.08 million) were traded.
The unique feature of ZECZ16 is that traders do not need to own ZEC to trade this futures contract. Using only Bitcoin, any trader can buy and sell ZEC using leverage. This is very important because it will be very difficult to buy, and and almost impossible to short physical ZEC due to the restricted supply. Many miners will not immediately sell the ZEC they produce in hopes of rapid price appreciation. That reduces the amount of ZEC publically available for sale.
The BitMEX ZECZ16 futures contract represents one of the easiest and most liquid ways for any investor to gain exposure to ZEC.
Zcash Future Price
If ZEC is a superior coin to DASH and Monero, then a portion of the funds invested in those two coins will shift to ZEC. The market capitalisation of DASH plus Monero is $154 million. Bitcoin’s market capitalisation is $10.31 billion. DASH + Monero’s market capitalisation is 1.50% of Bitcoin’s. The below table describes what the ZEC/USD price could be on January 1, 2017 depending on what percentage of DASH + XMR funds move into ZEC.
% of DASH + Monero
% Difference from Current Price
Even a relatively small amount of money that chases the small supply of ZEC will lead to a price bubble. It is not inconceivable that ZEC touches price parity with Bitcoin in the near term. These economics are not lost on traders, and that is why the ZECZ16 contract is up over 700% since it’s launch in mid-September.
On Friday October 28, 2016, the genesis block will launch. Expect a frenzied scramble for any and all ZEC that becomes publically available for sale.
Zcash (ZEC) is the hot new altcoin this fall. Zcash aims to bring complete privacy to digital currency transactions.
“Zcash offers total payment confidentiality, while still maintaining a decentralized network using a public blockchain. Unlike Bitcoin, Zcash transactions automatically hide the sender, recipient, and value of all transactions on the blockchain. Only those with the correct view key can see the contents. Users have complete control and can opt-in to provide others with their view key at their discretion.” [z.cash]
The Zcash genesis block is scheduled to launch on October 28th. After the astonishing rise of Monero over the past few weeks, many traders are equally bullish on Zcash.
ZEC coins will be distributed by mining and earning the block reward; there will be no Initial Coin Offering. As a result, the initial supply of ZEC coins will be limited.
Most traders want economic exposure to ZEC rather than buying, holding, and storing ZEC itself. Futures contracts allow traders to gain long or short exposure without ever touching ZEC.
Zcash funded development partially by pre-selling ZEC coins to investors. A portion of each block reward will be given to initial investors for a period of time. The spot market will be quite illiquid until enough blocks have been mined, and block rewards earned. Initial investors can forward sell their allotment of ZEC by selling futures contracts.
BitMEX is committed to providing price discovery for new and promising digital currencies. We are proud to be the first exchange to allow trading of any kind for ZEC/XBT. The BitMEX Zcash / Bitcoin futures contracts allow traders to go long or short with leverage on the ZEC/XBT exchange rate.
Symbol:ZECZ16 Underlying: ZEC/XBT Contract Value: 1 ZEC Quote Currency: XBT Expiry Date: 30 December 2016 12:00 UTC Settlement Currency: Margin and PNL are denominated in Bitcoin Leverage: 2x
Given that ZEC/XBT has not begun trading on any spot market, we do not know which exchange will have the most liquid market. We will make an announcement in early November about which spot exchange will be used for the settlement price.