Luxor and Bitnomial Launch Bitcoin Mining Derivative Product

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Luxor Technology Corporation and Bitnomial Inc. have unveiled a new derivative product aimed at the Bitcoin mining sector. 

On May 28, Bitnomial announced the launch of Hashrate Futures, a futures contract that allows for trading the computing power of the Bitcoin blockchain on Bitnomial’s U.S. derivatives exchange.

Luxor and Bitnomial’s BTC Mining Product

Hashrate Futures, trading under the ticker HUP, represent a novel financial instrument that provides miners with a tool to hedge their revenue while giving investors an opportunity to gain exposure to the Bitcoin mining hash rate

The product is designed to address the volatility and financial risks associated with Bitcoin mining, offering a means to manage these variables more effectively.

Bitcoin Network’s Computing Power to be Traded

A futures contract, in essence, is a financial derivative where two parties agree to buy and sell an asset at a predetermined future date and price. In the case of Hashrate Futures, the traded asset is the Bitcoin network’s computing power, priced according to the Luxor innovative “hashprice” index. Hashprice measures the revenue potential of Bitcoin mining, providing a standardized metric for these transactions.

The Hashrate Futures contracts are sized at 1 petahash (PH) for monthly durations and utilize the Luxor Bitcoin Hashprice Index as the reference rate for settlement. This index reflects the expected value of 1 TH/s of hashing power per day, offering a clear and quantifiable measure for miners and investors alike. 

Current Hashprice

According to the HashRateIndex, the current hashprice stands at $0.053 per terahash per second per day. This figure had previously spiked to $0.140 around the Bitcoin halving event on April 20 but has since decreased as the block rewards were halved, highlighting the fluctuating nature of mining profitability.

In addition to the regulated Hashrate Futures, Luxor also provides non-deliverable Hashrate Forwards. These are over-the-counter products that do not settle on an exchange regulated by the Commodity Futures Trading Commission (CFTC), giving participants additional flexibility in managing their hash rate exposure.

Luxor and Bitnomial Double Down on BTC

Luke Hoersten, founder and CEO of Bitnomial, elaborated on the significance of Hashrate Futures, stating that these contracts are fungible with the firm’s physical Bitcoin Futures. This fungibility enables spreads between Hashrate Futures and Bitcoin Futures, allowing participants to manage their returns in either USD or BTC. Moreover, it offers the ability to isolate hash rate risk from Bitcoin price risk, providing a sophisticated financial tool for market participants.

The introduction of Hashrate Futures comes at a challenging time for Bitcoin miners. Since the beginning of 2024, hashprice has declined by 46%, making it increasingly difficult for miners to turn a profit from their proof-of-work activities. This new product aims to provide a much-needed hedge against such market conditions, potentially stabilizing revenue streams for miners and offering new investment avenues for traders.

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