The cryptocurrency industry has been developing ever since the birth of Bitcoin in 2009. While the industry itself has arrived at its 11th year, the cryptocurrency derivatives market was first explored by BitMex, a crypto-products trading platform. After 2018, many cryptocurrency exchanges launched their future trading features, resulting in the rapid growth of the derivatives market. Besides, with features such as arbitrage and hedging, reducing risks, and price discovery, derivatives have become popular investment methods.
It is worth noting that the industrial structure of cryptocurrency derivatives is starting to embrace the path that traditional financial derivatives have taken, as categories such as options and tradable indexes are gradually introduced into these markets. However, the cryptocurrency market is still quite immature with technical issues and regulation restrictions; the size of crypto derivatives is far smaller than that of traditional finance markets. This report analyzes the development status and trends of cryptocurrency derivatives by comparing them to those of the conventional financial derivatives, providing readers with insights about the crypto derivatives market.
- Gate.io Research collected trading data from 5 BTI (Blockchain Transparency Institute) verified exchanges and found that the average trading volume of crypto derivatives occupies 57% of the entire cryptocurrency market. The size of the crypto derivatives market still has plenty of room to grow compared to the traditional financial market.
- Most crypto exchanges only launch products that are derived from major cryptocurrencies; futures are more popular among exchanges, while options and index derivatives are rarely seen in the market. Currently, there are only European options available, and it is predicted that the market will be expanded through American options and tradable indexes.
- There is still no monopoly in the current cryptocurrency derivatives market. Crypto exchanges haven’t marked their territory indefinitely in regards to crypto derivatives; from August 2019 until now, the crypto derivatives market has grown by 14.93% and 41.10% in two quarters respectively, suggesting that there is still plenty of room for growth.
- The development of crypto derivatives is also affected by technology and regulations. With the release of a list of entities that have been approved an exemption from holding a license under the Payment Service Act by the Monetary Authority of Singapore, it is believed that more countries and regions will relieve regulatory pressure on cryptocurrencies, which could lead to an exponential growth of the crypto derivatives market.
- Gate.io Research applied a second-order linear regression model to simulate the trading volume of crypto derivatives in the coming 2 to 3 years. According to the simulation, there will be exponential growth in the market, and the daily trading volume can reach 1 trillion USD. However, discrepancies in the simulation results might exist due to insufficient historical data.
The English version of the report will soon be updated; please stay tuned.
Disclaimer: Based on the due diligence and objective analysis by internal staff, the research draws a conclusion based on the observed market data. However, it should not be treated as the sole basis of any investment.
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