Gasless Derivatives Trading on Injective Protocol

A data-driven research on decentralized derivatives liquidity network, Injective Protocol ($INJ). Injective chain offers fast speed and zero gas fees.

Gasless Derivatives Trading on Injective Protocol

Investment Disclaimer:

  • I am not a registered investment, legal, or tax adviser or a broker/dealer, and all opinions expressed by me are from my research for educational purposes only.
  • Past performance presented here is not an indicator of future performance.
  • This post expresses my own opinion about the cryptocurrency mentioned herein and is not an offer to buy or sell, or a solicitation of any offer to buy or sell the cryptocurrency mentioned in this post.
  • I do hold a long position in INJ as a token holder.

1A. What is Injective Protocol?

Introduction

Injective Protocol is a decentralized cross-chain derivatives trading platform that is also hosted on a decentralized peer-to-peer network (i.e. InterPlanetary File System) as opposed to some DeFi platforms which are hosted on centralized servers like AWS, Azure or GCP, hence, making it more censorship resistance. Injective Protocol is built with Ethermint and implemented as a Cosmos SDK module. All operations that are happening on Injective Protocol are recorded and validated via Cosmos Tendermint-based Proof-of-Stake protocol.

Problems with DEX that Injective Protocol Is Solving

Decentralized Exchanges (DEX) which were traditionally built on Ethereum main net are usually slow in confirmation and suffer high gas fees whenever the traffic is congested, making them not suitable for intraday trading, which resulted in many users still resorting to centralized exchanges like Coinbase, Binance, KuCoin and FTX among others to conduct their trading activities. Injective Protocol is solving this problem by allowing digital assets from several other blockchains to be bridged to their layer-2 injective chain which offers lightning-fast execution speed and zero gas fees.

Front running is also a big problem in most DEX as Ethereum miners are able to arbitrage internally by re-ordering the transactions within the blocks that they produce, but Injective Protocol solves this issue by utilizing Verifiable Delay Function (VDF) to prevent front-running.

Product Offering and Unique Features that Can Be Found Only On Injective Protocol

Unlike other Automated Market Making protocols like UniSwap and SushiSwap which rely on liquidity pools supplied by different users and maintained via a constant product formula , Injective Protocol offers an order book-based system and allows its users to trade on not just spots/ pairs that most DEX provides, but derivatives with leveraging capability like perpetual futures, swaps and margin trading which are hardly available in most of the DEX that are currently available.

Injective Protocol Buyback and Burn Mechanisms

In order to ensure that INJ tokens are deflationary and encourage users to stake INJ, the protocol has a buyback and burn mechanism which targets to burn 60% of all exchange fees every week where users could bid for the fees collected (e.g. ETH, WBTC)  at a discounted price, but all biddings can only be done using INJ tokens. Bidders who offer the most competitive price would be selected and the INJ tokens paid to acquire these fees would be immediately burnt.

1B. Injective Protocol Project Updates

Users can begin to earn a projected 20% APY on their wINJ (Wormhole-bridged INJ token) on the Solana DeFi protocol, Katana, but it also comes with a risk where stakers could lose part or all of its original stake should the price of $INJ expire in-the-money at expiry date. When stakers staked their wINJ on Katana, essentially what they are doing is selling an out-of-the-money call options on INJ, and earning a premium from there.

Institutional crypto custody provider Copper has integrated the Injective mainnet, unlocking a diverse array of new opportunities for INJ staking. Currently Copper only supports staking for 13 popular assets such as Helium, Cardano, Polkadot and Algorand.

Injective Bridge V2 brings superior user experience alongside vastly lower fees for all Ethereum and Cosmos users. New Injective ecosystem DApps will find the bridge to be extraordinarily helpful since it’ll allow them to easily onboard.

Injective Pro is the first major DApp built on the Injective blockchain. The exchange has eclipsed 4.5 Billion dollars in trading volume since its initial release just a few months ago. The upgrade (from v1 to v2) includes a major user interface overhaul and backend optimizations that ultimately create the best fully decentralized trading experience in the market.

  • Injective Launching a Music Festival in Metaverse

Injective collaborated with one of the fastest growing record labels, 88rising alongside LVMH and Lexus, to put on a global digital music festival in the metaverse!

  • Launch of Zero-Comission Sports Betting DApps

The Injective community launched Frontrunner, a zero-commission decentralized sports betting platform built on Injective.

2. How Injective Performs Relative to Other Cryptos ?

Performance of All DEX Cryptos Under Quantdoge’s Watchlist since 2021 (Sorted by % Return)

INJ has undergone 24.89% return from USD 4.0432 to USD 5.0496 since 01 Jan 2021.
INJ is the 13th best performing crypto assets among others here.

Performance of All DEX Cryptos Under Quantdoge’s Watchlist since 2021 (Sorted by % Change in Market Cap)

INJ market cap has increased 359.24% from $ 54.51M to $ 250.34M since 01 Jan 2021.

INJ is the 11th best performing crypto assets by market cap growth among others here.

Judging from both performance measurements (Market Cap and Price), Injective Token (INJ) is growing on par with its potential.

Based on Injective’s February snapshot, in the last 2.5 months leading to Feb 2022,

  • Over $4B Billion in volume traded on Injective exchange DApps
  • Over 300,000 $INJ burned
  • Over $200M in assets bridged to Injective
https://blog.injective.com/injective-pro-v2-launch/

Besides, it is also one of the fastest growing exchange, achieving $1B in trading volume within just 30 days !

3. Technical Analysis on Injective Token

3.1. Volume Weighted Average Price (VWAP)

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VWAP is a technical indicator used by a trader to gauge the overall trend of an asset price movement. VWAP line (orange line) represents the volume-weighted average price (average price here is defined as the average of high, low and close prices) while close price line (blue line) represents the price when INJ is closed at the end of every single day.
Whenever blue line (close price) is above orange line (VWAP), it indicates that the asset is gaining momentum and being traded higher than its average price level. This would represent a 'buy' opportunity for short-term momentum trader whom task is to trade following the trend while a longer term mean-revision trader might take it as a 'sell' opportunity, anticipating that the price of INJ (blue line) to fall to its average level (orange line).
Whenever blue line (close price) is below orange line (VWAP), it indicates that the asset is losing momentum and being traded lower than its average price level. This would represent a 'sell' opportunity for short-term momentum trader whom task is to trade following the trend while a longer term mean-revision trader might take it as a 'buy' opportunity, anticipating that the price of INJ (blue line) to rise to its average level (orange line).

As of 13 Mar 2022, VWAP is suggesting that INJ is trading on par with its weekly volume-weighted average price, but it’s still trading way below its monthly volume-weighted average.

3.2. Moving Average Convergence Divergence (MACD)

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MACD is often used by trader as a momentum indicator. There are 2 lines that form the above charts, namely MACD (12, 26) lines and Signal(9) line, while the histogram is calculated by subtracting Signal (9) from MACD (12,26). Histogram would fall to the negative territory whenever MACD (12, 26) is trending at a lower level than Signal (9) and rise to the positive territory whenever MACD (12,26) is trending at a higher level than Signal (9).
MACD (12, 26) is computed by subtracting the 26-day exponential moving average (EMA) of INJ closing price from its 12-day EMA.  Signal (9) on the other hand is calculated as the 9-day EMA of MACD (12,26).
As MACD (12, 26) goes higher away from Signal (9), it signifies that INJ is gaining momentum and whenever it goes trends at a lower level than Signal (9),it signifies that OSMO is losing momentum.

As of 13 Mar 2022, MACD is suggesting that INJ is trading within a consolidation phase.

3.3. Bollinger Band

Bollinger band is often being used by mean-reversion trader as a gauge to assess how undervalued or overvalued an asset is. Its chart made up of 4 lines, namely:

  • SMA (20) (blue line), which is the 20-day simple moving average price of INJ
  • Upper Band (orange line), which is computed by adding 2 standard deviations of INJ on SMA (20)
  • Lower Band (red line) , which is computed by subtracting 2 standard deviations of INJ from SMA (20)
  • Close (green line), which is the daily closing price of INJ

Whenever close line (green) touches the lower band (red), it indicates that INJ is corrected too much and is being traded at an undervalued level, representing a 'buy' opportunity. On the other hand, whenever close line (green) touches the upper band (orange), it indicates that INJ is gaining too much momentum and is being traded at an overvalued level, thus indicating a 'sell' opportunity.

As of 13 Mar 2022, Bollinger Band is suggesting that INJ is neither oversold nor overbought.

3.4. Relative Strength Index (RSI)

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Just like Bollinger Band, Relative Strength Index is often being used by mean-reversion trader as a gauge to assess how undervalued or overvalued an asset is. There are 2 psychological levels, i.e. 30 and 70 in RSI. 

Whenever the RSI reaches 30, it indicates that INJ is corrected too much and is being traded at an undervalued level, representing a 'buy' opportunity. On the other hand, whenever RSI reaches 70, it indicates that INJ is gaining too much momentum and is being traded at an overvalued level, thus indicating a 'sell' opportunity.



As of 13 Mar 2022, RSI is suggesting that INJ is neither oversold nor overbought.

3.5. Price and Volume Analysis

INJ has a pretty low daily active trading volume and its price is trading within a consolidation phase.

Based on the technical analysis presented above, Quantdoge takes a neutral stance on INJ, but I could be wrong, hence please make your careful due diligence before making any financial decision.

4. Injective’s Risk Profile

According to Investopedia, Value-at-Risk is defined as:

A  statistic that quantifies the extent of possible financial losses within a firm, portfolio, or position over a specific time frame. This metric is most commonly used by investment and commercial banks to determine the extent and probabilities of potential losses in their institutional portfolios.

Based on the 100-day 95% historical Value-at-Risk (VaR) profile of Injective defined above, INJ seems to trade at a similar risk level on 13 Mar 2022 as compared to 10 days before on 03 Mar 2022, with its biggest pullback being seen at -19.57% on a single day during the last 100 days. However, I could be wrong, hence please make your careful due diligence before making any financial decision.

"injective protocol" reached its peak in Google Search on 2022-02-06 with a Google Score of 100.

Over the last quarter, "injective protocol" Google Score has increased 197.3 % from 14.8 to 44.0

Over the last 6 months, "injective protocol" Google Score has increased 117.82 % from 20.2 to 44.0

Overall, Injective Protocol gained an increasing amount of adoptions and interest by the internet users.


Over the last month, injective protocol was mainly used and traded on EU countries, namely Turkey, Belgium and Portugal.

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