A former Goldman Sachs employee Alex Grebnev wants to launch a Crypto Repo Trading platform allowing investors to operate with repurchase agreements based on cryptocurrencies and possibly moving the crypto market to the financial mainstream.
So, basically, what does this mean? And how will it work?
A repo is an agreement to sell securities and repurchase them on a specified future date (“maturity”) at a pre-agreed price. Repos facilitate the funding of long positions, the borrowing of assets to cover shorts, collateral re-usage, efficient portfolio management and safe (collateralized) cash investment. Oxygen is targeting a broad range of crypto asset holders with a variety of economic goals:
- Token holders (including strategic investors and miners) seeking to post their assets as collateral to free up capital or earn income;
- Speculators and market-makers aiming to benefit from price volatility and to capture arbitrage opportunities;
- Early post-crowdsale entities with idle crypto assets, that could be lent against collateral, providing income generation;
- Tokenomy-powered / Tokenomy-anchored businesses demanding liquidity and liquidity management tools to deploy liquidity surpluses, or to cover liquidity gaps;
- Crypto investment funds seeking interest income through the lending of their portfolio assets (while retaining exposure);
- Crypto exchanges looking to provide more trading options to their clients.
In а CryptoRepo transaction, one party borrows crypto assets from another party and commits to returning these assets with interest at a future date. The Borrower provides crypto assets to the Lender as collateral, creating a secured digital transaction using an Ethereum-based Smart Contract.
Cryptocurrency holders would generate profits from lending their coins through Oxygen to a second party. In return, they would receive another coin as collateral until their initial token is returned. The second party would use the borrowed coin for short-term trading or transactions and will have to pay a fee as part of the deal.
Alex Grebnev predicts the platform will stabilize the cost of borrowing cryptocurrencies, whose price fluctuations can deter investors who want to bet on falling prices, known as taking a short position. He expects repo agreements to be struck for periods ranging from hours to a year or two.
Here’s what he has to say about cryptocurrencies and its future: “The cryptocurrency market is developing very fast, but it should also be developing on a professional level, with the application of real-world concepts. There are already a number of users utilizing the market and in order for it to develop, real-world applications must be brought into the world. This is why we are applying the repo market to the crypto market – users can profit without losing their assets.”
If the operation is successful, the crypto-space will move even further into the mainstream: This past December, Chicago-based exchanges CME Group and Chicago Board Options Exchange (CBOE) launched Bitcoin futures contracts.
Let us wait for the First Crypto Repo Trading platform.