Pear Protocol’s Streamlined Pair Trading Is in the Works
The protocol has secured $1.25 million in its latest seed round
Dall-e modified by Blockworks
On-chain spread trading platform Pear Protocol has secured $1.25 million in its seed investment round, allowing users to create leveraged long and short positions on different assets.
Pear Protocol, a dapp launching on Ethereum layer-2 Arbitrum, was backed by investors from Flow Ventures, RNR Capital, Portico Ventures and JY Capital, among others.
Spread trading — or specifically pair trading — is the idea that an investor can short one asset while longing another. It expresses a trader’s view on the relationship between two assets.
“You’re essentially market neutral, if the market goes up or down, it doesn’t really matter,” the co-founder of Pear Protocol who goes by the psudonym hufhaus9 told Blockworks.
In the past, an inability to utilize cross-margining (the process of offsetting different positions) has made it difficult for traders to pair trade on decentralized derivative platforms.
Pear Protocol enables its users to use the equity in their portfolios to support multiple positions simultaneously, hufhaus9 said.
“This enables traders to use their entire portfolio as collateral to cover various positions,” he said.
For example, using cross-margined USDC collateral, a trader could open long and short leveraged positions together as a pair trade, hufhaus9 said.
“These positions are then routed through existing DEX engines and market makers utilizing their liquidity for all trades. All positions are represented by an ERC-721(NFT), similar to a Uniswap V3 position,” he said.
This enables the trading position of the NFT to be composable and easily transferred between different addresses or used as collateral.
Beyond cryptocurrencies, traders can also create trading asset pairs with stocks and commodities.
“On-chain crypto trading is still centered around fast-forming narratives. Pear will help various traders — retail users, trading communities, DAO treasuries, and institutional portfolio managers — create unique narrative-based trades in as little as one click,” hufhaus9 said.
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