{"id":145642,"date":"2021-01-01T22:26:33","date_gmt":"2021-01-01T19:26:33","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/crypto-derivatives-gained-steam-in-2020-but-2021-may-see-true-growth\/"},"modified":"2021-01-01T22:26:33","modified_gmt":"2021-01-01T19:26:33","slug":"crypto-derivatives-gained-steam-in-2020-but-2021-may-see-true-growth","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/crypto-derivatives-gained-steam-in-2020-but-2021-may-see-true-growth\/","title":{"rendered":"# Crypto derivatives gained steam in 2020, but 2021 may see true growth"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a256fef179d9\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a256fef179d9\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-derivatives-gained-steam-in-2020-but-2021-may-see-true-growth\/#Institutional_investors_are_bringing_the_key_change\" >Institutional investors are bringing the key change<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-derivatives-gained-steam-in-2020-but-2021-may-see-true-growth\/#Other_macroeconomic_factors_are_also_pushing_demand\" >Other macroeconomic factors are also pushing demand<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-derivatives-gained-steam-in-2020-but-2021-may-see-true-growth\/#Ether_derivatives_grow_due_to_DeFi_and_Eth2\" >Ether derivatives grow due to DeFi and Eth2<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/crypto-derivatives-gained-steam-in-2020-but-2021-may-see-true-growth\/#2021_set_to_be_a_crucial_year\" >2021 set to be a crucial year<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Crypto derivatives gained steam in 2020, but 2021 may see true growth <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>2020 was the most important year for the crypto derivatives market so far. Both Bitcoin (BTC) and Ether (ETH) derivatives steadily grew throughout the year, with their futures and options products available across exchanges such as the Chicago Mercantile Exchange, OKEx, Deribit and Binance.\u00a0<\/p>\n<p>On Dec. 31, Bitcoin options open interest reached an all-time high of $6.8 billion, which is three times the OI seen 100 days before that, signifying the speed at which the crypto derivatives market is growing amid this bull run.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-01\/c1621aaf-7470-40d1-95a9-ef31d04d6089.png\"><\/figure>\n<p>The bull run has led to a lot of new investors entering the market amid the uncertainty that plagues traditional financial markets due to the ongoing COVID-19 pandemic. These investors are looking to hedge their bets against the market through derivatives of underlying assets like Bitcoin and Ether.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Institutional_investors_are_bringing_the_key_change\"><\/span>Institutional investors are bringing the key change<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>While there are multiple factors driving the growth of crypto derivatives, it\u2019s safe to say that it has primarily been driven by interest from institutional investors, considering that derivatives are complex products that are difficult for the average retail investor to understand.<\/p>\n<p>In 2020, a variety of corporate entities such as MassMutual and MicroStrategy showed considerable interest by purchasing Bitcoin either for their reserves or as treasury investments. Luuk Strijers, chief commercial officer of crypto derivatives exchange Deribit, told Cointelegraph:<\/p>\n<blockquote><p>\u201cAs Blackrock\u2019s Fink put it \u2018cryptocurrency is here to stay\u2019 and bitcoin \u2018is a durable mechanism that could replace gold.\u2019 Statements like these have been the driver for the recent performance, however as a platform we have seen new participants joining the entire year.\u201d <\/p><\/blockquote>\n<p>Strijers confirmed that as a platform, Deribit sees institutional investors entering the crypto space using trade instruments they are familiar with, like spot and options, which led to the tremendous growth in open interest throughout 2020.<\/p>\n<p>The Chicago Mercantile Exchange is also a prominent marketplace for trading options and futures, especially for institutional investors, as the CME is the world\u2019s largest derivatives trading exchange across asset classes, making it a familiar marketplace for institutions. It recently even overtook OKEx as the largest Bitcoin futures market. A CME spokesperson told Cointelegraph: \u201cNovember was the best month of Bitcoin futures average daily volume (ADV) in 2020, and the second-best month since launch.\u201d<\/p>\n<p>Another indicator of institutional investment is the growth in the number of large open interest holders, or LOIHs, of CME\u2019s Bitcoin futures contracts. A LOIH is an investor that is holding at least 25 Bitcoin futures contracts, with each contract consisting of 5 BTC, making the LOIH threshold equivalent to 125 BTC \u2014 over $3.5 million. The CME spokesperson further elaborated:<\/p>\n<blockquote><p>\u201cWe averaged 103 large holders of open interest during the month of November, which is a 130% increase year over year, and reached a record 110 large open interest holders in December. The growth of large open interest holders can be viewed as indicative of institutional growth and participation.\u201d<\/p><\/blockquote>\n<p>The fact that the crypto derivatives market is now in demand is a sign of maturity for assets like Bitcoin and Ether. Similar to their role in the traditional financial markets, derivatives offer investors a highly liquid, efficient way of hedging their positions and mitigating the risks associated with the volatility of crypto assets.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Other_macroeconomic_factors_are_also_pushing_demand\"><\/span>Other macroeconomic factors are also pushing demand<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>There are several macroeconomic factors that are also causing the boost in demand for the crypto derivatives market. As a result of the COVID-19 pandemic, several large economies including the United States, the United Kingdom and India have been stressed due to limited working conditions and growing unemployment.<\/p>\n<p>This has caused several governments to roll out stimulus packages and engage in quantitative easing to reduce the impact on the base economy. Jay Hao, CEO of OKEx \u2014 a crypto and derivatives exchange \u2014 told Cointelegraph:<\/p>\n<blockquote><p>\u201cWith the pandemic this year and many governments\u2019 responses to it with massive stimulus packages and QE, many more traditional investors are moving into Bitcoin as a potential inflation hedge. Cryptocurrency is finally becoming a legitimized asset class and this will only mean a greater rise in demand.\u201d<\/p><\/blockquote>\n<p>There is a growing interest from the mining community and other companies generating income in Bitcoin looking to hedge their future earnings so as to be able to pay their operating expenses in fiat currencies.<\/p>\n<p>Besides institutional demand, there is a significant increase seen in retail activity as well, Strijers confirmed: \u201cThe unique accounts active on a monthly basis in our options segment keep rising. Reasons are overall (<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">social<\/a>) media attention to the potential of options.\u201d The CME spokesperson also stated:<\/p>\n<blockquote><p>\u201cIn terms of new account growth, in Q4 2020 to date, a total of 848 accounts have been added, the most we\u2019ve seen in any quarter. In November alone, 458 accounts were added. In 2020-to-date, 8,560 CME Bitcoin futures contracts (equivalent to about 42,800 bitcoin) have traded on average each day.\u201d<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"Ether_derivatives_grow_due_to_DeFi_and_Eth2\"><\/span>Ether derivatives grow due to DeFi and Eth2<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Apart from Bitcoin futures and options, Ether derivatives have also grown tremendously in 2020. In fact, the CME even announced that it will be launching Ether futures in February 2021, which in itself is a sign of the maturity that Ether has reached in its life cycle. <\/p>\n<p>Previously, the crypto derivatives market was monopolized by products using Bitcoin as the underlying asset, but in 2020, Ether derivatives grew to take a significant share of the pie. Strijers further elaborated:<\/p>\n<blockquote><p>\u201cWhen looking at USD value of turnover we see that on Deribit the BTC derivatives contributed the majority of volume, however the percentage has decreased from ~91% in January to ~87% in November. During the peaks of the DeFi summer, the BTC percentage dropped to mid seventies due to the increased ETH activity and momentum.\u201d<\/p><\/blockquote>\n<p>The reason that Bitcoin derivatives make up a larger portion of the crypto derivatives market is that BTC is now well understood by the market and has received validation by large institutions, governing bodies and several prominent traditional investors. However, in 2020, there were several factors that influenced the demand for Ether derivatives as well. Hao believes that \u201cThe huge growth in DeFi in 2020 and the launch of ETH 2.0\u2019s Beacon chain has definitely spurned more interest in Ether and, therefore, Ether derivatives.\u201d<\/p>\n<p>However, even though Ether is continuing its bull run alongside Bitcoin and will likely see a further increase in demand for derivatives, it\u2019s highly unlikely that BTC will be overtaken any time soon. Hao further elaborated: \u201cWe will see rising demand for both of these products, however, BTC as the number-one cryptocurrency will likely see the steepest growth as more institutional dollars flood the space.\u201d<\/p>\n<h2><span class=\"ez-toc-section\" id=\"2021_set_to_be_a_crucial_year\"><\/span>2021 set to be a crucial year<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Starting with the launch of CME\u2019s Ether futures product in February, this year is set to be an even bigger year for crypto derivatives if the bull run continues. The market also recently witnessed the biggest options expiry yet, with nearly $2.3 billion worth of BTC derivatives expiring on Christmas. <\/p>\n<p>With traditional markets, the derivatives market is several times larger than the spot market, but it\u2019s still the opposite with crypto markets. So, it seems the crypto derivatives market is still in its nascent stage and is set to grow exponentially as the industry expands in size. As volumes increase, markets tend to become more efficient and offer better price discovery for the underlying asset, as Strijers added:<\/p>\n<blockquote><p>\u201cDue to the overall increase in market interest, [&#8230;] we see more market makers quoting our instruments, increasing our ability to launch more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/watch-movies-tv-seriess\/\" data-internallinksmanager029f6b8e52c=\"8\" title=\"Watch Movies &amp; TV Series\" target=\"_blank\" rel=\"noopener\">series<\/a> and expiries, tightening spreads which acts as a fulcrum for further interest as execution becomes cheaper and more efficient.\u201d<\/p><\/blockquote>\n<p>Apart from Bitcoin and Ether derivatives, there are altcoin derivatives products that are offered on various exchanges, most popularly perpetual swaps but also even options and futures. Hao elaborated further on these products and their demand prospects:<\/p>\n<blockquote><p>\u201cMany other altcoins are already on offer to trade derivatives particularly in perpetual swap but also futures. [&#8230;] The demand for this is largely driven by retail traders as some of these assets haven\u2019t won over the confidence of institutional traders yet.\u201d<\/p><\/blockquote>\n<p>Even though institutional investors are not flocking to the derivatives products of these altcoins just yet, that is set to change with the further growth of decentralized finance markets and the use cases that they can offer. Ultimately, this can translate into a rise in demand for more crypto derivatives in the near future.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. 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Both Bitcoin (BTC) and Ether (ETH) derivatives steadily grew throughout the year, with their futures and options products available across exchanges such as the Chicago Mercantile Exchange, OKEx,&#8230;<\/p>\n","protected":false},"author":1,"featured_media":145643,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.cointelegraph.com\/uploads\/2020-12\/8cbfc221-2ca5-4204-b8e6-158885d9b747.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[87029,74862,75845,75012,74891,75591,83485,75592],"class_list":["post-145642","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bakkt","tag-bitcoin","tag-cme","tag-derivatives","tag-ethereum","tag-huobi","tag-new-years-special","tag-okex"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/145642","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=145642"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/145642\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/145643"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=145642"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=145642"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=145642"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}