Luxor Now Offers Deliverable Forward Contracts with Upfront and Fixed Payment Options

Today, the Luxor Derivatives Desk is excited to announce the release of our latest offering: Deliverable Hashrate Forwards with upfront and fixed payment options. This addition to Luxor's hashrate derivatives suite empowers Bitcoin miners to secure future revenue by locking in upfront payment directly in their Luxor Mining Pool accounts, providing Luxor clients with yet another way to secure income from their hashrate.

This move addresses the specific needs of both derivatives and mining pool clients. In traditional commodity sectors like agriculture and energy, deliverable forwards are essential financial tools that commodity producers use to secure upfront revenue and mitigate market volatility. Luxor’s Deliverable Hashrate Forwards enable Bitcoin miners to sell their future hashrate production for immediate capital at a predetermined hashprice, while also providing the institutional investment community with exposure to the Bitcoin mining sector without the need to own physical assets.

This changes the game for how miners can monetize their hashrate. Luxor miners can now choose between spot payout methods for their hashrate (like FPPS) and forward payout options with upfront or fixed future payment. To be eligible for forward payment, miners must be on Luxor pool, post margin, and complete credit profiling procedures and due diligence requirements with the Luxor Derivatives Desk.

This latest release will also make accounting and management easier for Luxor miners because settlement for their mining and hedging activity takes place directly in their pool account. With Luxor, Bitcoin miners have an all-inclusive, seamless experience for managing and monetizing their hashrate.

Luxor Hashrate Forwards Suite

Below, we give a rundown of what a Hashrate Forward trade through the Luxor Derivatives Desk entails.

The buyer and seller of a Luxor Hashrate Forward contract agree to the following variables:

1. Unit Hashprice (e.g., $80/PH/s/Day or 0.00220 BTC per PH/s/Day)

• USD or BTC-denominated contracts
• Upfront or fixed payment

2. Daily Hashrate (e.g., 100 PH/s/Day)

• Deliverable or non-deliverable

3. Dates (e.g., December 2023)

• Monthlies available out to a maximum of six months.
• Custom contract durations are also available

Luxor facilitates the contract by providing the following services:

• Matching counterparties
• Promoting price discovery
• Managing counterparty risk
• Luxor Position Manager for daily profit and loss calculation
• Acting as the settlement agent as the contract is settled to Luxor’s Bitcoin Hashprice Index.

In just under a year, Luxor Hashrate Forwards have seen tremendous growth in the number of market participants and total volume traded.

New Hashrate Investment Strategies

These additions to Luxor’s Hashrate Forward suite also unlock new investment strategies for hashrate buyers.

Hashrate buyers can now purchase forward hashrate – usually at a discount to spot prices – and deliver it directly to their Luxor Mining Pool account. In contrast to many of the other hashrate products available to investors, Luxor’s Deliverable Hashrate Forwards are easy to use and transparent. With tools like Luxor’s recently released orderbook, we ensure users have access to the best pricing possible. 

On its own, purchasing hashrate will deliver variable returns. If hashprice rises above a buyer’s purchase price they earn a positive return. If hashprice falls below a buyer’s purchase price, they earn a negative return. 

For example, a buyer may purchase 3,000 PH for 90 days for 500 BTC, corresponding to a unit hashprice of 0.00185 BTC per PH/s/Day. By paying the total 500 BTC upfront, the buyer is able to secure a unit hashprice at a discount to spot markets, which are currently paying 0.00226 BTC per PH/s/Day. The buyer’s return will be the spread between the discounted unit hashprice and the actual settlement of hashprice in the spot market. Potential return scenarios include but are not limited to:

But by using a combination of Luxor Hashrate Forward products, investors can employ fixed-return trading strategies (i.e., yield). 

In addition to purchasing hashrate upfront, buyers can de-risk their upfront hashrate purchase and secure a Bitcoin yield by simultaneously selling a non-deliverable hashrate forward with standard future fixed payment. A spread can exist between the two hashprices because deliverable forwards with upfront payment tend to trade at a discount to non-deliverable forwards with standard future payment.

For example, a buyer may purchase 3,000 PH for 90 days for 500 BTC upfront, which corresponds to a unit hashprice of 0.00185 BTC per PH/s/Day. At the same time, the upfront buyer may sell 3,000 PH for 90 days in Luxor’s non-deliverable forward market for 0.00190 BTC per PH/s/Day, which locks in 513 BTC production for the 90 days period.

The investors' return profile will be the spread between the upfront purchase of hashrate and the sale of that same hashrate in non-deliverable forward markets. This spread or yield is predetermined at the start of the trade and is subject to change with market conditions.

Building for the Future of Bitcoin Mining

While these exciting new upgrades move our marketplace forward, it is just the beginning. At Luxor, we are committed to bringing all the tools in traditional commodity markets to the Bitcoin mining ecosystem. We will continue to iterate on the product and incorporate your feedback into future updates as we build premier products for the hashrate market.

Stay tuned for future developments!

Luxor Derivatives Team

Disclaimer

This content is for informational purposes only, you should not construe any such information or other material as legal, investment, financial, or other advice. Nothing contained in our content constitutes a solicitation, recommendation, endorsement, or offer by Luxor or any of Luxor’s employees to buy or sell any derivatives or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the derivatives laws of such jurisdiction.