The crypto derivatives market is ready for a significant increase in volumes amid problems with liquidity in the spot trading sector and its flow into derivatives. Genesis Trading experts came to this conclusion.
“As spot market liquidity suffers and order book depth chronically declines, it is becoming increasingly clear that a significant portion of future cryptocurrency volume growth will come from derivatives,” the firm said in a Q2 report.
The experts noted a number of key developments in the sector of derivative products based on digital assets over the period. Among them:
- the maximum since the beginning of the year indicator of the daily trading volume on the Deribit options exchange (against the background of the breakdown of bitcoin up the $30,000 mark);
- the launch of futures with a fixed expiration date based on digital gold for institutional investors by the largest American crypto platform Coinbase;
- an increase in the volume of trading in cryptocurrency options by about 25% in July on the leading North American platform for such products – CME.
According to analysts, derivatives are becoming an important tool for the adoption of cryptocurrencies by institutional investors. At the same time, they noted a trend of shifting interest from futures to options.
However, the trading volume of the latter in the crypto industry is about a tenth of that of the spot market, while in traditional finance (TradFi) the situation is reversed.
“The notional volume of U.S. stock options exceeded the traded value of underlying assets for the first time in 2021. If this TradFi trend is followed, the crypto options market could rise 10 times from current levels,” the experts said.
Another important event of the second quarter at Genesis Trading was the entry into the industry of a group of large companies led by BlackRock with applications to create spot bitcoin ETFs. The launch of such products has historically served as a catalyst for the price of the underlying asset, the experts emphasized.
Recall that in July, the US Securities and Exchange Commission accepted for consideration five proposals for the creation of exchange-traded bitcoin funds.
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