Crypto derivatives gained steam in 2020, but 2021 may see true growth

2020 was the most important year for the crypto derivatives market so far. Both Bitcoin (BTC) and Ether (ETH) derivatives steadily grew throughout the year, with their futures and options products available across exchanges such as the Chicago Mercantile Exchange, OKEx, Deribit and Binance.

On Dec. 31, Bitcoin options open interest reached an all-time high of $6.8 billion, which is three times the OI seen 100 days before that, signifying the speed at which the crypto derivatives market is growing amid this bull run.

The bull run has led to a lot of new investors entering the market amid the uncertainty that plagues traditional financial markets due to the ongoing COVID-19 pandemic. These investors are looking to hedge their bets against the market through derivatives of underlying assets like Bitcoin and Ether.

Institutional investors are bringing the key change

While there are multiple factors driving the growth of crypto derivatives, it’s safe to say that it has primarily been driven by interest from institutional investors, considering that derivatives are complex products that are difficult for the average retail investor to understand.

In 2020, a variety of corporate entities such as MassMutual and MicroStrategy showed considerable interest by purchasing Bitcoin either for their reserves or as treasury investments. Luuk Strijers, chief commercial officer of crypto derivatives exchange Deribit, told Cointelegraph:

“As Blackrock’s Fink put it ‘cryptocurrency is here to stay’ and bitcoin ‘is a durable mechanism that could replace gold.’ Statements like these have been the driver for the recent performance, however as a platform we have seen new participants joining the entire year.”

Strijers confirmed that as a platform, Deribit sees institutional investors entering the crypto space using trade instruments they are familiar with, like spot and options, which led to the tremendous growth in open interest throughout 2020.

The Chicago Mercantile…

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