Mettalex, founded by Fetch.ai CEO and early DeepMind investor Humayun Sheikh, has announced today the launch of its decentralized exchange for commodities trading, setting a milestone as the first of its kind in the world. Javelin Global Commodities, a leading trading firm of bulk commodities, will be among the first clients to use Mettalex’s platform to manage risk on commodities exposure.
Being blockchain-agnostic, Mettalex is launching on both Ethereum and Binance Smart Chain. The exchange incorporates Fetch.ai technology and enables traders to take leveraged long or short positions against a number of commodities including Lithium Carbonate, Steel Recyclables, Zinc, Iron Ore, Natural Gas and spreads BTC/Gold and sCEX/sDEFI. All of these are unique markets in the decentralized finance (DeFi) space.
According to data gathered by Bloomberg, hedge fund bets on rising commodity prices are near the highest since 2011 and are worth almost $120 billion. Hedging tools, however, remain largely inaccessible by small and medium-sized enterprises due to high costs. Additionally, commodity market participants face obstacles related to front running, poor liquidity, price manipulation, and loss of value in the form of margin calls. Mettalex was founded to solve these problems by allowing physical asset holders a cost, capital, and risk-efficient access to commodities markets, enabled by DeFi liquidity, and automated by blockchain-based smart contracts.
By leveraging advanced machine-learning Mettalex brings innovation to both automated market making and price data delivery mechanisms (oracles). Mettalex’s Autonomous Market Makers act as a party to all trades on the exchange, ensuring that that system is fully collateralized with stablecoin liquidity, and setting the prices of long and short positions. Fetch.ai’s agent-based oracles enable commodity-focused price data to securely flow into Mettalex and settle markets.
“A critical byproduct of the Mettalex platform is the transparency it will bring to the pricing data around the world’s most valuable commodities,” explains Sheikh. “By making this type of market intelligence and the ability to trade more readily accessible, Mettalex aims to bring one of the oldest forms of trade in human history into the present century. With Mettalex we aim to align the incentives of traders, stablecoin liquidity providers, and physical commodity holders to create a one-of-the-kind tool that is accessible to anyone on this planet, 24/7/365.”
All trades on Mettalex happen within a predetermined price band based on the asset’s historical volatility. The band allows getting exposure at only a fraction of the cost of the traded asset, effectively enabling leverage. Unlike other exchanges, on Mettalex, users can create the markets they need. The prerequisite is a reliable oracle that the platform plans to make fully customizable.
In addition to the technological aptitudes of Mettalex itself, the exchange has also integrated Davis Index, the top provider of metal market intelligence, onto the platform. Davis Index produces more than 1,400 proprietary price indexes for free-market recyclable metals and secondary alloys that are not listed on exchanges but drive global trade.
“The ability to hedge the numerous recyclables grades and specialty finished products that make for most of the infrastructure around us has long been a need in our industry,” said Sean Davidson, CEO of Davis Index. “The current system provides the industry with less than a handful of instruments and the basis risk and costs are just unworkable for most companies. Mettalex is finally answering the call for a decentralized exchange that can list any commodity. We look forward to providing our price benchmarks on the Mettalex platform to give the manufacturing, demolition, and alloy producing sectors the precise hedging instruments they need.”
“We understand firsthand the value that Mettalex can provide to derivatives trading in commodities,” said Peter Bradley, CEO of Javelin Global Commodities. “The inability to access liquid exchange-traded derivatives limits price discovery and risk management opportunities across a wide range of commodities. Mettalex provides a platform to bring transparency and liquidity to these markets which can be used by participants across the commodity value chain.”
Photo by Erwan Hesry on Unsplash
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