{"id":326735,"date":"2021-08-17T18:34:00","date_gmt":"2021-08-17T15:34:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/cryptocurrency-derivatives-market-shows-growth-despite-regulatory-fud\/"},"modified":"2021-08-17T18:34:00","modified_gmt":"2021-08-17T15:34:00","slug":"cryptocurrency-derivatives-market-shows-growth-despite-regulatory-fud","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/cryptocurrency-derivatives-market-shows-growth-despite-regulatory-fud\/","title":{"rendered":"# Cryptocurrency derivatives market shows growth despite regulatory FUD"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 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-6a412b8bc0436\" 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-6a412b8bc0436\" 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\/cryptocurrency-derivatives-market-shows-growth-despite-regulatory-fud\/#CME_data_reveals_strong_growth_in_2021\" >CME data reveals strong growth in 2021<\/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\/cryptocurrency-derivatives-market-shows-growth-despite-regulatory-fud\/#Organic_growth_supported_by_ETH_activity\" >Organic growth supported by ETH activity<\/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\/cryptocurrency-derivatives-market-shows-growth-despite-regulatory-fud\/#Regulators_frown_on_derivatives_trading\" >Regulators frown on derivatives trading<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Cryptocurrency derivatives market shows growth despite regulatory FUD <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-128018ef>The cryptocurrency market has successfully rebounded from the two-month slump it had gone into from late May to the end of July. Bitcoin (BTC) and Ethereum (ETH) have been leading the charge, posting impressive gains over the last two weeks. The market is seeing price levels that it had reached back in May of this year.<\/p>\n<p>Along with the price gains, the cryptocurrency derivatives market that includes financial instruments like futures, options and even micro futures are also seeing rejuvenated interest from investors. According to data from Bybt, The open interest (OI) in Bitcoin options across all the global exchanges offering the product has more than <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bybt.com\/options\">doubled<\/a> from the yearly low of $3.63 billion on June 26, hitting a 90 day high of $7.86 billion on Aug. 14. <\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-08\/d75a7e94-867c-4b14-8056-ac8dbf932a93.png\"><\/figure>\n<p>Cointelegraph discussed this spike in OI with Shane Ai, head of product R&amp;D at Bybit, a cryptocurrency derivatives exchange, who said: \u201cThe rise in Option OI is mostly driven by institutional players, and the rising popularity of third-party OTC platforms has facilitated easier execution of multi-legged strategies with deeper liquidity \u2014 which are prerequisites for more institutional participation.\u201d Data from on-chain analytics provider CryptoQuant also reveals that institutions are buying BTC in the same manner as they did back in late 2020.\u00a0<\/p>\n<p>A similar spike in growth is seen in the metrics of the Ether options market as well. The OI in Ether Options jumped 75% from $2.42 billion on 30 July to hit a two-month high of $4.26 billion on Aug. 14. This puts the year-on-year (YoY) growth for this market at 846%. <\/p>\n<p>Notably, the crypto derivatives market is still in the nascent stages of its development, as it only sprung into existence in Q2 2020. Even global investment banking giant Goldman Sachs announced their plans earlier in June to expand its foray into the cryptocurrency markets with Ether options.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"CME_data_reveals_strong_growth_in_2021\"><\/span>CME data reveals strong growth in 2021<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The growth is seen even in the crypto derivatives products offered by the Chicago Mercantile Exchange (CME), the world\u2019s largest derivatives exchange. CME is often considered to be a benchmark for institutional interest. Currently, they have four crypto derivatives offerings, Bitcoin Futures, Ether Futures, Micro Bitcoin Futures and Bitcoin Options. <\/p>\n<p>According to the data provided by CME, as of Aug. 11, the average daily volume (ADV) in their Bitcoin futures has grown nearly 30% from 8,231 contracts year to date in 2020 to 10,667 contracts year to date in 2021. In the same duration, the open interest for these futures grew by 18.6% to 8,988 contracts year to date in 2021. <\/p>\n<p>While CME has been offering their BTC futures and options since 2017 and 2020, respectively, the exchange launched both their Ether futures and Micro BTC futures earlier this year in February and May. <\/p>\n<p>Since their launch on Feb. 8, CME Ether futures have had an ADV of 2,864 contracts with open interest averaging at 2,436 contracts. A record volume of 11,980 contracts was traded on May 19, and a record OI of 3,977 contracts on June 1.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-08\/fe179212-9614-45c2-92d2-a29bbbe3f318.png\"><\/figure>\n<p>In the case of CME Micro BTC Futures, they have had an ADV of 21,667 contracts with their OI averaging at 19,990 contracts. This product is designed to enable even retail investors to manage their Bitcoin price risk. Its size is 1\/10th that of a Bitcoin and has traded 1.5 million contracts since the launch. An all-time high of 94,770 contracts was traded on May 19 with a record open interest of 38,073 contracts being attained on June 1.<\/p>\n<p>Cointelegraph discussed this growth in the markets with Luuk Strijers, chief commercial officer of crypto derivatives exchange, Deribit who stated: <\/p>\n<blockquote><p>\u201cWe have seen incredible growth in Q1 and Q2 this year showing the potential of derivatives and, in our case specifically, options driven by ever-increasing client demand. We expect this trend to continue as we are onboarding an increasing number of (institutional) clients.\u201d<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"Organic_growth_supported_by_ETH_activity\"><\/span>Organic growth supported by ETH activity<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Strijers added that the spike in OI in August was not only due to the rise in price leading to the notional value growing but also due to the expansion of the number of open contracts after the large Q2 expiry for BTC options. <\/p>\n<p>This reveals that the OI growth that the market is currently undergoing is organic and not just a by-product of the notional value rising. He mentioned that this effect was even larger for Ether, adding:<\/p>\n<blockquote><p>\u201cThe latter is explained by the launch of EIP-1559 and the consequence that nearly $100m worth of ETH has been burned since the upgrade. Furthermore, the NFT hype results in a lot of people buying NFTs, using their ETH and buying upside calls instead to avoid missing out on the potential upside.\u201d<\/p><\/blockquote>\n<p>The Ethereum network finally underwent the London upgrade on Aug. 5 which ushered in the much anticipated Ethereum Improvement Proposal (EIP) 1559 that changes the transaction pricing mechanism for the network and the management of the fees. Strijers opined on how the London hard fork impacted the upwind for ETH, saying, \u201cThe market seems to <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>reciate the London fork changes. A lot of ETH was already locked in smart contracts or staked, and now the supply is getting even more scarce due to the gas burn mechanism, driving prices upwards.\u201d<\/p>\n<p>Ai mentioned more on the specific impact of the hard fork on the ETH derivatives market, saying that the ETH IV term structure has gone into contango (a scenario where the futures price of the asset is higher than the spot price), alongside steeper call-put skews as trends further in time are observed. Steeper skews could often indicate higher prices for Out of the Money (OTM) put options and lower prices for OTM call options.<\/p>\n<p>Several players in the industry are innovating with automated solutions to simplify Bitcoin options trading for retail investors. Delta exchange, a crypto derivatives platform, recently <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/medium.com\/the-capital\/robo-trading-on-delta-exchange-put-your-money-on-autopilot-fc1103eed056\">launched<\/a> automated trading under the product name \u201cEnhanced Yield\u201d for BTC, ETH and Tether (USDT).<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Regulators_frown_on_derivatives_trading\"><\/span>Regulators frown on derivatives trading<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Despite the immense growth of the crypto derivatives market, or rather because of it, regulatory authorities are often known to be skeptical of the sector. In the recent past, various organizations have extended their cautionary warnings to curbing actions for players offering these financial instruments in the market.<\/p>\n<p>In a very public settlement, BitMEX has agreed to pay $100 million to the United States Commodities Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN) to put a case <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cftc.gov\/PressRoom\/PressReleases\/8270-20\">filed<\/a> in the U.S. District Court on Oct. 1, 2020, to rest. The CFTC charged BitMEX owners with \u201cillegally operating a cryptocurrency derivatives platform\u201d and Anti-Money Laundering (AML) violations.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Cause and effect: Will the Bitcoin price drop if the stock market crashes?<\/em><\/strong><\/p>\n<p>In another instance of regulatory bodies increasing their scrutiny on the derivatives trading sub-ecosystem, global cryptocurrency exchange Binance has announced that they will be shutting down derivatives trading in the European region, beginning with Germany, Italy and the Netherlands. In addition to the EU region, Binance has also announced that they would be restricting access to derivatives products for its users in Hong Kong. CEO Changpeng Zhao mentioned that it was a measure to establish \u201ccrypto compliance best practices worldwide.\u201d<\/p>\n<p>Early in January this year, the United Kingdom\u2019s Financial Conduct Authority (FCA) banned crypto exchanges from selling crypto derivatives and exchange-traded notes (ETNs) to retail consumers. The regulatory authority cited the reason for this ban as that these products are \u201cill-suited for retail consumers due to the harm they pose.\u201d<\/p>\n<p>Despite regulatory organizations cracking down on crypto derivatives, the futures and options markets have continued to show immense growth this year. A report by Inca Digital <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/inca.digital\/intelligence\/geotagging-crypto-traders\/\" data-amp=\"https:\/\/inca-digital.cdn.ampproject.org\/c\/s\/inca.digital\/amp\/intelligence\/geotagging-crypto-traders\/\">revealed<\/a> that hundreds of traders in the U.S. are evading local regulations and trading crypto derivative assets on exchanges like FTX and Binance. These platforms have official U.S. counterparts that don\u2019t offer derivatives products on their platform due to regulatory concerns. <\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Biden\u2019s infrastructure bill doesn\u2019t undermine crypto\u2019s bridge to the future<\/em><\/strong><\/p>\n<p>However, Brett Harrison, president of FTX.US, the U.S. counterpart of FTX, recently <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/markets.businessinsider.com\/news\/currencies\/ftx-us-cryptocurrency-derivative-trading-spot-brett-harrison-bitcoin-futures-2021-8\" data-amp=\"https:\/\/www-businessinsider-com.cdn.ampproject.org\/c\/s\/www.businessinsider.com\/ftx-us-cryptocurrency-derivative-trading-spot-brett-harrison-bitcoin-futures-2021-8?amp\">stated<\/a> that the platform aims to offer crypto derivatives trading in the U.S. in less than a year. Harrison also mentioned that as institutional investors are responsible for nearly 70% of the trading volume of FTX.US, their current aim is to grow their retail base in the country.<\/p>\n<p>This reasoning could be the driving force behind the exchange\u2019s recent decision to hire Kevin O\u2019Leary \u2014 aka Mr. Wonderful of <em>Shark Tank <\/em>fame \u2014 as the brand ambassador and official spokesperson for FTX.<\/p>\n<p>While that could be pure conjecture, the growth of the crypto derivatives market is undeniable and inevitable in the future as the liquidity improves. These instruments that provide hedging and risk solutions are much needed by investors, especially in these times of high volatility.<\/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. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/cryptocurrency-derivatives-market-shows-growth-despite-regulatory-fud\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Cryptocurrency derivatives market shows growth despite regulatory FUD &#8221; The cryptocurrency market has successfully rebounded from the two-month slump it had gone into from late May to the end of July. Bitcoin (BTC) and Ethereum (ETH) have been leading the charge, posting impressive gains over the last two weeks. The market is seeing price&#8230;<\/p>\n","protected":false},"author":1,"featured_media":326736,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDgvNmM2NGEwNWUtOGEyOC00MTZmLWEyYWQtYmY2ZDNlZjMzOWY2LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74937,75012,117],"class_list":["post-326735","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-price","tag-derivatives","tag-business"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/326735","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=326735"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/326735\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/326736"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=326735"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=326735"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=326735"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}