Bitcoin (BTC) and Ether (ETH) dominate the cryptocurrency derivatives market, the most important platforms being Huobi, Chicago Mercantile Exchange, OKEx, Bybit, and Deribit. The Chicago Mercantile Exchange also fell into an Ether rally, launching Ether futures on February 8th, with a total nominal volume of $ 30 million on the first day.
Before launching on Feb.5, $ 1 billion worth of options expired, prompting the bulls to target a $ 40,000 price range, according to basic option data. But the expiration has been replaced by a tweet by Elon Musk in support of Bitcoin right after the expiration; This actually allowed Bitcoin to break the $ 40,000 mark before reaching an all-time high with Tesla BTC purchases of $ 1.5 billion.
“The use and popularity of options is increasing, as evidenced by the continuous increase in open interest rates, trading volumes and the number of trading clients,” Luke Stairs, commercial director of cryptocurrency exchange Deribit, told Cointelegraph. “The higher the expiration date, the more likely it is to affect the underlying market,” he added.
Look for the derivatives market
In traditional markets, derivatives play a leading role in spot and asset pricing, but this is largely due to the fact that the traditional spot markets are only a fraction of the derivatives market size.
Meanwhile, in cryptocurrency markets, the spot markets are much larger than the size of the derivative markets. However, as the derivatives market grows in size, the link to the spot markets appears to be strengthening.
One such indicator, which indicates whether the market is bullish or bearish in relation to BTC, is the delta deviation from 30% to 20%. It indicates the difference in insurance premiums between neutral and uplink calls compared to similar purchase plans.
Jay Howe, CEO of cryptocurrency exchange OKEx, told Cointelegraph that the growing influence of the derivatives market in the spot markets is a positive development and said, “With the derivatives market growing in size and importance, we expect to see it.”
However, unlike the patterns that are expected to emerge in the derivatives market in relation to the spot markets, the effect on the price is often unclear. Xin Ay, in charge of product research and development of cryptocurrency derivatives at Bybit, a derivative cryptocurrency exchange, told Cointelegraph:
“The increase in OI futures should be compared to an increase in spot volume. Contrary to many people’s beliefs, the dominance of Delta 1 swaps and futures contracts in spot trading volume has decreased significantly since December of last year despite incentives to punish excessive long-term jobs when The funding is excessive, but it no longer affects the spot rates. ”
Ben Kaslin, head of research and strategy at AAX, a digital activity exchange, told Cointelegraph that the extent to which BTC’s spot price depends on the derivatives market is overrated. However, he also pointed to the functions of derivatives markets in relation to the spot markets, and said: “Derivatives play a role in creating a more complex infrastructure around Bitcoin as a resource. It is attracting a number of investors who would not be ready to use Bitcoin directly.”
Tesla investment will open up the derivatives market
Institutional investors often turn to derivatives to hedge other risks involved in portfolios. The same can be said of the cryptocurrency markets, especially given that institutional investors now seem to be showing a keen interest in Ether as well. A report by CoinShares stated that of the $ 245 million institutional inflows seen in the cryptocurrency market in the first week of February, $ 195 million (80%) were invested in Ether products, leading to the launch of CME futures. Ether on Monday. February 8.
This indicates that institutional investors are starting to diversify their cryptocurrencies further by investing in cryptocurrencies other than Bitcoin. This opinion is only supported by the fact that Elon Musk has given a lot of positive attention to Bitcoin and even other smaller cryptocurrencies like Dogecoin (DOGE).
His support for Bitcoin via Twitter, along with his company Tesla buying bitcoins for $ 1.5 billion, and perhaps even accepting Bitcoin payments for Tesla products, will only push the market forward and encourage more institutional investors to follow. Hao also talked about how this affects the derivative markets:
“When we see more Fortune 500 companies tracking Tesla management and more institutional cash flow in this area, we will see an increase in the demand for derivatives as a tool to ensure volatility and tap into greater value.