Cryptocurrency traders reportedly exchanged $12.3 trillion worth of futures last year — up 400% from the year before.
The amount of money invested with crypto derivatives like options and futures at any one time spiked by a similar amount.
According to tokenemics crew TokenInsight, market-wide open interest was $3.5 billion at the start of 2020 and $17 billion at its end.
TokenInsight studied 43 cryptocurrency exchanges that support derivatives.
- Futures and cryptocurrency trade on “main integrated exchanges” like Binance at a 2:7 ratio — which makes sense considering futures allow leverage.
- Traders are favoring perpetual contracts (which track similarly to spot markets), with their market share rising from 39% to 84%.
- In Q3, Ethereum-powered DeFi contracts took market share away from Bitcoin. By Q4, BTC futures made up just 63% of the total derivatives volume.
Unlike buying and selling cryptocurrency on “spot markets,” derivatives offer alternate ways to profit from price movements without actually holding the underlying asset.
Buying Bitcoin futures, for instance, is similar to betting on its price at some point in time.
Trading options is more analogous to trading insurance on an investment — options give the right to purchase (or sell) a digital asset at a specific price and function well as hedges.