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Options trading is a big step for the crypto derivatives market

June 14, 2020

Those of us involved in the cryptocurrency space are used to them accelerated nature of this fast growing industry. New technologies are quickly getting old, bright projects are losing their shine, and what began as some advocates of data protection who send each other “magical internet money” has developed into a completely new asset class with a robust infrastructure around them. Every new product, application or financial instrument that we add has value and attracts more participants. Options trading is a big step for the crypto derivatives market and is already proving its value.

How the crypto space grew

superior in 2017before the Chicago Mercantile Exchange or the Chicago Board Stock Exchange entered the room Cryptocurrency with its Bitcoin (BTC) futures offering. Back then, the most common expression heard (over and over again) about cryptocurrency was that it is like the “wild, wild west”. Lawless, volatile, full of fraud projects and initial coin offers that promised too much and didn’t deliver enough or even stole money from investors.

Despite the fact that Bitcoin has existed since 2009, it was very new to most people at that time. Some of the profits made were phenomenal and the losses were devastating. Many banks said Bitcoin was a scam, including (perhaps most famous) JPMorgan CEO Jamie Dimon, who said it was a scam in September 2017.

Options trading is a big step for the crypto derivatives market
Options trading is a big step for the crypto derivatives market

By the day of Today, all banks want to integrate blockchain technology (or have already done so) to improve efficiency and reduce costs. JPMorgan and his boss have made a 180 degree turn and even launched their own JPM coin to enable instant payments.

Large financial institutions in the United States have opened even Bank accounts for major cryptocurrency exchanges in the United StatesWhile governments around the world are actively exploring or experimenting with their own version of a cryptocurrency supported by their central banks.

The point is that Cryptocurrency can no longer be ignored. With better regulation and decisive action, we have managed to eliminate many of the bad actors and fraud projects, making the space almost unrecognizable.

The rise of crypto derivatives

The derivatives sector has now attracted investments from institutional players and last year was a historic step by a company supported by the New York Stock Exchange to enter the market with its physically established Bitcoin futures contracts. Actually, Crypto growth regardless of bull or bear markets was exponential And now derivatives are leading the charge. However, we still have a long way to go.

The total capitalization of the cryptocurrency market is still under $ 300 billion today. Compared to gold to $ 9 trillion or the world exchange At almost $ 100 trillion, that’s clear Cryptocurrency is still in its infancy.

When looking at traditional markets, derivatives typically represent more than four times the trading volume of the underlying asset. However, Spot trading is even higher in crypto. It won’t be that way for long. We at OKEx believe that Derivatives will quickly outperform the spot and grow four to five times larger in the coming years. And that growth will be driven by more sophisticated offerings such as options trading.

The importance of trading or options trading

Options are very important because they offer traders more versatility and a great way to hedge their risk. Like futures, Options contracts allow traders to buy or sell an agreed amount of the underlying asset at a specified time in the future at an agreed price. Unlike futures, however, options Give the buyer or seller the rightinstead of the obligation to buy or sell on that date.

This depends on whether the trader purchases a call option or a put option. In short, the difference between the two is the first The trader can exercise the right to buy Bitcoin (or the relevant asset). and with the secondyou can exercise the right to sell. Because they are rights rather than obligations, many traders are more familiar with trading options, especially in a market as volatile as crypto.

Options are a relatively new feature. Until mid-2019, Deribit was the only exchange to offer crypto-based options, followed by Bakkt in December 2019 and OKEx and CME, which issued BTC options shortly thereafter. Despite the short amount of time they spent in space, crypto-based options are already widely used by BTC traders to generate revenue and protect their assets from rampant volatility. Due to the halving of Bitcoin, they are currently particularly useful for miners. Options can be used to secure future earnings and ensure an acceptable price for selling mined bitcoinSimilar to the farmers in ancient Greece, to secure their income in the event of a poor harvest. We saw this happen before the halving in April when the price of BTC rose again and the BTC options reached a monthly high for which OKEx led the leaderboard.

As with every innovation and every product range The market is becoming more interesting, mature and thoughtful than traditional markets. And it is more attractive for institutional traders to enable traders to keep their pricing strategies more flexible.

Beyond Bitcoin Options Trading

Of course, the dominance of Bitcoin in the market is undeniable. Of the thousands of cryptocurrencies that have grown around it Bitcoin dominance remains close to 65%. Bitcoin too is generally accepted and better understood. It will be the gateway to trading cryptocurrencies and derivatives for most people and institutions. However, this does not mean that there is no space for other crypto options.

in the OKEx, one of the main reasons why we continue to thrive A leading exchange is due to our wide range of products. After the high demand for BTC / USD options OKEx adds ETH / USD options for traders This week too, and we believe it will gain ground quickly.

All these alternatives help diversify the market, make it more colorful, richer and more interesting. The field of crypto derivatives is becoming increasingly competitive as new market participants are constantly being added. This can only be a good thing for the room. In the coming years we will see the volume grow from billions to trillions, and the cryptocurrency will finally become a major competitor..

The views, thoughts and opinions expressed here are only those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Jay Hao He is a technology veteran and an experienced industry leader. Prior to OKEx, he focused on blockchain applications for live video streaming and mobile games. Before entering the blockchain industry, he already had 21 years of solid experience in the semiconductor industry. He is also a recognized market leader with successful experience in product management. As CEO of OKEx and a strong believer in blockchain, Jay expects the technology to remove transaction barriers, increase efficiency and ultimately have a significant impact on the global economy.

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