Parcl is a new decentralized exchange that is specifically designed to let traders trade derivatives contracts tied to the real estate market.
It does so by indexing baskets of real estate prices and turning them into a tokenized contract so that traders can trade them purely on the blockchain.
How Does it Work?
The Parcl is a Solana-based decentralized application that lets traders trade or hedge their real asset portfolio directly on the blockchain.
It lets traders go long and short on the real estate market without owning any real estate itself, essentially creating a derivative futures contract for the real estate market.
To use this platform, traders need a decentralized wallet that is compatible with the Solana Blockchain and has some $SOL on it, as it operates on the Solana Blockchain, which means that it uses $SOL as its fee token.
Traders can use stablecoins to transact on the platform, as it mainly depends on the liquidity of $USDC for its daily transactions.
The way that traders can use this platform is similar to any decentralized exchanges, where they only need to connect their wallet and then input the amount of money they want to use to buy or sell the contract.
Each of the contract’s prices is represented through an index of real estate prices, where there are multiple contracts available on the platform to be traded with.
Indexes of Real Estates in Cities
The index is created through a median calculation of real estate prices per square foot in a specific city.
For example, a contract will be named California, where the value of the contract represents the median per square foot price of the properties in the real estate market of California.
Multiple cities have been covered by the derivatives contracts on the Parcl platform, which currently spans across the US and Europe.
The price of a contract is always updated as it uses the oracles that are available on the Solana Ecosystem, such as Pyth and Chainlink.
This means that the price of the contract is precise as the data is being fed by the oracles in real time without any lags.
However, since the real estate market is not as liquid as other assets like crypto and stocks, the price will only be updated from a reliable centralized source, which updates the data only once every 24 Hours.
This means that this platform is more suitable for swing traders, as the price will only fluctuate daily.
When Can People Trade Contracts?
Note that the contracts on this platform are treated similarly to a security asset, which means that it only trades when the traditional financial market opens.
Since there are multiple contracts on the platform, the contracts will be available to trade only when the financial market is open in the underlying city of the contract.
Even though it uses a decentralized technology with a tokenized version of the contract, the contract is not available to be traded 24 Hours a day, as it follows the traditional market rules of the financial market.
This means that if traders are trading the California contract, then they will have to wait to buy or sell it until the US market session opens.
Strategies for Potential Profits
Looking at the mechanisms of the platform, it can be seen that several disadvantages might disappoint traders, especially if they are already used to the liquidity and less-restricted nature of the crypto market.
However, through this contract, people can buy real estate to either invest in it or use it as a hedge on their real properties.
Through this platform, anyone can own a square foot of real estate, which is the main benefit of using the blockchain and crypto technology, which is fractionalization.
There are a couple of strategies that traders can use to benefit from this platform and the contract itself, one of which is utilizing the macroeconomic data of a certain country correlated with the contract.
For example, if a trader is trading the California contract, then they can look at housing companies' data, home sale data, residential construction data, and even construction spending data.
From there, they will be able to analyze a pattern in which they can use it to decide on whether to go long or short on the contract.
Another way of looking at it is through the overall macroeconomic data, with the correlation theory of the economic condition to the real estate market, where when the economy is bad real estate prices tend to go down and vice versa, just like what happened during Covid-19.
Conclusion
The platform is highly suitable for traders who like to diversify their assets, especially in terms of hedging as this can be another option in their portfolio.
However, since traders are trading the housing market, it is good to have macroeconomic knowledge as well as awareness of economic data so that they can use this platform more profitably.
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Disclaimer: The views expressed belong exclusively to the author and do not reflect the views of this platform. This platform and its affiliates disclaim any responsibility for the accuracy or suitability of the information provided. It is for informational purposes only and not intended as financial or investment advice.