Synthetic Trading involves dealing with financial instruments that mimic the price and characteristics of an underlying asset without actually holding the asset itself. In the crypto space, this often occurs through derivatives like perpetual swaps, options, or tokenized representations on decentralized platforms. It allows traders to gain exposure to asset price movements with greater capital efficiency or to access assets not directly available. This method offers flexible market participation.
Context
News frequently covers Synthetic Trading in discussions about decentralized finance (DeFi) innovation, derivatives markets, and capital efficiency in crypto. The creation of synthetic assets allows for broader market access and sophisticated trading strategies. However, the associated risks, such as oracle dependency and collateralization requirements, are also closely scrutinized.
The Zero-Fee Perpetual primitive fundamentally re-aligns trader incentives by extracting value only from profitable positions, significantly lowering the cost of on-chain market-making.
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