Crypto derivatives – a new wave or maturing market


  • Crypto derivatives market will grow in 2020

  • More and more traders are using bitcoin futures

  • Major cryptocurrency exchanges are betting on bitcoin futures

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The past 2019 has been an explosive year for the crypto derivatives market. The number of new derivative products has increased significantly. Many exchanges have already added the ability to trade derivatives for major cryptocurrencies, allowing clients to maximize their profits.
But this is just the beginning, and in the future we can expect many innovative products that will provide even more flexible options for trading derivatives..

According to the analytical service, the total daily volume of bitcoin futures on the top crypto exchanges regularly exceeds the $ 35 billion mark..

Since 2019, the daily spot trading volume for bitcoin has been many times lower than the volume of futures contracts traded. Can this be considered a maturing crypto market or traders simply lack volatility??

A Brief Overview of the Bitcoin Futures Trading Market

Monitoring and analytics service shows that the daily trading volume of bitcoin futures is more than 4 times the volume of the spot market.

The chart above shows that the daily volume of futures trading is more than $ 16 billion, while the volume of spot transactions is less than $ 4 billion (the adjusted real volume on the top 100 crypto exchanges is taken into account).

Exchanges such as Huobi, OKEx, Binance, and BitMEX account for nearly 80% of daily Bitcoin futures volume.

The ratio of the volumes of futures and spot markets on the top crypto exchanges, which both types of transactions offer, can be seen in the chart below.. 

As can be seen from the diagrams, the volumes of futures transactions on all exchanges many times prevail over the spot ones.. 

What is the fundamental difference between bitcoin futures transactions?

A futures contract is an agreement to buy or sell an asset at a later time at a predetermined price. It is a derivative instrument because its value depends on the underlying asset – Bitcoin. Every futures trade needs a buyer and seller with the same volume and maturity.

When selling a futures contract, the seller postpones settlement on it. In spot trading, settlement occurs at the same time as the transaction.

It is important to note that futures trading does not take place in the same order book as spot trading..

What made traders switch to the futures market?

There are 4 likely reasons behind the prevalence of futures trading volume – the ability to hedge and play short, using a smaller deposit size, the desire to trade increased volatility, and the market maturing..

The ability to hedge

For example, miners use futures to hedge future earnings and reduce uncertainty in cash flows. Institutional traders also often resort to this method: Bitcoin buyer’s positions are hedged with a futures contract and vice versa – Bitcoin shorts are hedged with futures longs.

The ability to play for a fall

Crypto derivatives - a new wave or maturing market

During the rapid decline in bitcoin, participants in spot trading tend to quickly enter stablecoins, while missing out on the opportunity to capitalize on the fall. At the same time, futures trading provides an elegant solution for making a profit – playing for a fall by opening short positions or in the exchange slang “short” (from the English. Short).

Using a smaller deposit

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Many traders feel uncomfortable when they have to keep large amounts of their own funds on the exchange wallet. In this case, leveraged futures transactions help reduce the actual volume of entry into the transaction, thereby eliminating the possibility of theft of funds when the exchange is hacked..

Increased volatility

Despite the crashes and ups that occur with Bitcoin, such as March 12-13 (the price of the first cryptocurrency fell from $ 8,000 to $ 3,800), special categories of traders note a lack of daily volatility.

A similar circumstance clearly pushed bored traders to trade futures with huge leverage, up to 125X on Huobi and 100x on BitMEX..

Market maturation

As the crypto market matures, it becomes more and more like a traditional stock market, where derivatives trading volumes prevail..

The active development of bitcoin futures trading occurred due to the launch of derivative platforms. So, in 2019, we saw the start of futures trading on existing spot exchanges, including Huobi Globak, OKEx, Binance, BitMax, and BiKi. In addition, in 2019-2020, new players entered the crypto derivatives market – FTX, Deribit, Bybit, Phemex and others.. 

As for traders, of course, institutionalists have long known about the additional benefits of futures trading. However, retail crypto traders have just begun to grasp the art of futures trading. Most likely, adaptation to liquidation risks and the use of optimal strategies in this regard is the key to the further development of the crypto derivatives market..


All information contained on our website is published in good faith and objectivity, and for informational purposes only. The reader is solely responsible for any actions he takes based on the information received on our website..

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Crypto derivatives - a new wave or maturing market
Crypto derivatives - a new wave or maturing market
Crypto derivatives - a new wave or maturing market
Crypto derivatives - a new wave or maturing market

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