Morpher is a trading platform built on the Ethereum blockchain where traders stake cryptocurrency against the price-action of traditional markets via smart contracts, effectively creating a virtual future. Since 2018, Morpher’s novel approach to tokenized derivatives has attracted Silicon Valley and European venture capital, with its latest round led by Tim Draper’s Draper Associates and participation from RTP Ventures and the Austrian deep-tech fund APEX Ventures.
DeFi Sources of Alpha
Morpher’s trading platform is just one example of the many uses of blockchain in the growing sector of Decentralized Finance (DeFi) applications. DeFi projects often aim to mimic real-world financial processes, such as lending, insurance, and ownership, by leveraging the permissionless properties of blockchain to create self-executing and self-governing applications.
DeFi projects have also become a considerable source of yield for contrarian investors immersed in blockchain and cryptocurrency trading. Morpher is part of the latest trend in DeFi to synthesize real world assets via virtual derivatives presenting traders and investors with new and easier ways of generating alpha.
Morpher’s users are able to use cryptocurrency to trade stocks, fiat foreign-exchange rates, equity indices, commodities, and other cryptocurrencies. Cryptocurrency exchanges in the past have offered their users stock markets and commodity derivatives pegged to crypto, but Morpher isn’t a traditional exchange.
Trading with No Limits
Trading on Morpher occurs without any counterparties, and the underlying markets are never traded. This is accomplished through the creation of so-called virtual futures, which are created when a user stakes Morpher’s MPH tokens to the price-action profile of a market via smart-contracts. When the trader wishes to close their position, the smart-contract automatically calculates the delta between the underlying market prices, and the corresponding return is reflected in the token stake. 100 MPH tokens invested in a position in AAPL, which returns 10% over a period of time, will result in the user receiving 110 MPH, the original stake, plus 10 MPH – the return.
Without the need for traditional counterparties, Morpher’s markets can stay open 24/7, and liquidity is effectively infinite. Even while the underlying markets aren’t trading, such as with stocks on the weekend, users can still enter new trades, and manage existing positions, at the last available market price. This opens up a world of opportunities, as Morpher can build markets seamlessly out of any reliable and unarbitragable data source. This key property has led to Morpher offering its users a wide range of features, many of which would not otherwise be possible to support in traditional markets; perfect investment fractionality, seamless shorting, trading during extended hours and closed sessions, and up to 10x leverage on a trade-level.
In the future, Morpher plans on adding unique markets that don’t exist in the traditional world of finance such as fringe commodity spot markets for cannabis, housing price indices, and other economic indicators.
Consumer Fintech for Everyone
Morpher’s protocol functions as the ultimate dark pool. The ability to make any data tradable presents a promising offer to sophisticated investors and traders, many of which focus on hedging asset-class volatility endemic to cryptocurrency by staking their tokens against traditional assets, or shorting select digital assets.
On the other hand, Morpher is an ideal platform for novice trades who want to learn to trade without assuming too much risk. Its rapidly growing community of 50,000+ traders mainly consists of individuals from emerging markets, where investing options are often extremely limited.
Empowering access to investments remains the main objective of Morpher. “80 percent of the global population does not have access to the markets,” explains Morpher’s CEO and veteran quant trader, Martin Froehler, “and we want to create an ideal world for trading and investing. In an ideal world, you could trade all global assets with perfect liquidity, no middleman, and zero fees. That’s essentially Morpher.”
There are also technological challenges, especially concerning the Ethereum blockchain and its high transaction costs. While trading on Morpher appears effortless, it takes a lot of effort to develop a web3 application that lends itself to a seamless experience. Morpher spends a lot of resources on internal research and development, and on expanding their product portfolio. Since launching Morpher in the summer of 2020, the company has developed and released its own native web3 wallet, a decentralized exchange, and is about to release its mobile apps for iOS and Android.
The future of capital markets
The completion of its 6m Series A is a strong vote of confidence for the fast growing Austrian startup. Morpher’s novel virtual futures showcase how layer-2 solutions and DeFi can be used to empower a new generation of investors and traders from emerging markets.
The virtualisation of assets offers a number of fundamental advantages. Not only does trading become more accessible to novice investors who can manage their risk better via fractional trading, but expert investors benefit as well from round-the-clock trading of traditional markets and easily short-selling underperforming markets.
While pursuing its goal of making financial markets accessible via blockchain, Morpher provides access to a wide variety of assets to traders from all over the world. That is a game changer for citizens of emerging countries whose investment options have been severely limited until now. Another equally important dimension is the removal of barriers to entry to blockchain and DeFi solutions in general. Morpher’s easy to use platform is a big step towards making DeFi accessible to everyone, regardless of their income, country of residence, or prior knowledge of blockchain.
Martin Froehler, CEO
Email: [email protected]
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