Ostium - Onchain Commodities Trading: What You Need to Know
Forex & Commodities Perps, Prediction Market Strategies, & More
In yesterday’s edition, we discussed Azura, a protocol looking to make the trading of onchain assets as easy as using a CEX. But what about offchain assets? After all, crypto’s goal isn’t just to make tokenisation a viable alternative to securities offerings, but also to take existing assets and make them tradable onchain.
Last cycle, we saw multiple projects on Terra looking to make the onchain trading of securities a reality, with Mirror being the most popular. Of course, this development ceased after the chain’s ultimate collapse, and progress stalled out. But there is still a lot of demand in this area, and it’s inevitable that other teams will take up this Mantle. The increase in popularity of RWAs earlier this year and last year is encouraging, but a lot of this focused on the tokenisation of treasuries and real estate or other objects, not making securities or commodities tradable onchain.
The growth of stocks like $NVDA during the past couple of years might have sparked a bit of FOMO in crypto traders, when outside markets might have otherwise seemed boring and too stale. Even the process of getting foreign stocks listed on exchanges like NYSE is a burden in and of itself, requiring the use of receipt securities which are sort of like wrapped tokens. The process of getting some form of tokenisation of securities or commodities is assumed to also be a challenge. In today’s edition, we’ll focus on Ostium. Ostium encourages diversification of crypto portfolios via exposure to forex and commodities, providing virtual price exposure of key assets.
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Background on Ostium
Ostium is looking to serve a very specific niche in crypto. The protocol provides price representation and exposure to traditional assets for speculative reasons via perpetuals. It also gives users a platform for diversification, to potentially escape the all-encompassing volatility of crypto, or at least have exposure to a different asset class with distinct ups and downs.
On Ostium, users can trade commodities, forex, and blue-chip crypto assets. The team has also stated indice trading will also be available. Currently, asset selection is limited to forex including $JPY (Japanese Yen), $EUR (Euro), and $GDP (Great Britian Pound), commodities including $CL (Crude Oil), $HG (Copper), and $XAU (Gold) as well as $BTC and $ETH.
For commodities and forex trading, Ostium uses its own RWA oracle infrastructure, which is operated by Stork Network. A shared liquidity layer and dual vault structure is used to handle trades, where a liquidity buffer is basically used to absorb trader PnL. Sort of like GMX, the liquidity buffer serves as a counterparty to traders, accruing value when PnL is negative and losing value when it is positive. However, the layer that users can deposit liquidity into is an additional backstop, distinct from the primary liquidity layer. So, there is less risk of temporary PnL risk, as the primary liquidity buffer handles settles trades first. LPs can earn trading and liquidation fees in exchange for their provisions.
In addition to its core trading features, another area of utility that Ostium provides its users is its strategies feature. This enables users to access pre-set limit orders based on global events. Right now, users can customize limit orders to be triggered if certain presidential election prediction market odds are met, as well as rates probabilities. This is simplified into ‘bull’ or ‘bear’ options, resulting in long or short limit orders being triggered based on conditional prediction market odds respectively. Current strategies include Trump Bull, Kamala Bear, as well as Rates Bull or Rates bear.
This is an interesting set of strategies built on top of Polymarket, one of the first instances of a protocol building out features based on Polymarket odds. This helps Polymarket as well, building an edge over other markets like Kalshi or PredictIt which are not built on smart contracts. We could see similar integrations being rolled out on other protocols, as we’ve seen recently how the markets and Polymarket have seemingly traded in tandem.
It makes sense that Ostium is one of the first protocols to include this sort of integration since the protocol allows for the trading of commodities and currencies, which might be seen as more adjacent to more macro and geopolitical events. We’ve also recently released multiple long-form reports on MetaDAO, which uses prediction markets to actually make governance decisions, a concept that has also grown in popularity.
Overall, Ostium provides perpetuals trading for real-world assets, namely forex and commodities, an area underserved in crypto. If crypto and the onchain environment in particular become even more frothy, demand for this sort of thing might not necessarily increase, at least from crypto natives. We’ve sort of seen this with demand for stablecoins and ‘real yield’; demand for these offerings waned when token prices finally started increasing, and rate cuts also became increasingly likely. However, Ostium can perhaps onboard a certain breed of traders, who are interested in both crypto and traditional assets. At this point in time, Ostium has $1.3M in TVL with over $25M in cumulative volume traded.
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