Significant participation of institutional players in the crypto market this year has accelerated the growth of digital assets by 300% in the past year. Crypto derivatives trading heavyweights such as CME and Bakkt have seen higher trading volumes overall, according to a report generated by Blockchain Valley Ventures (BVV).
Top spot exchanges such as Huobi, BitMEX and OKEX dominate the derivatives market in this sector at present, but Binance has overtaken BitMEX’s head start in the futures race despite having launched less than 12 months ago. Late entrant Binance Futures is now the top futures trading platform in the market, and has recently offered new DeFi-based futures contracts stemming from its newly introduced DeFi Composite Index.
Aside from the new developments from the world’s largest cryptocurrency exchange Binance, the DeFi boom has certainly given derivatives trading a boost. Protocols such as Synthetix and Augur have stayed ahead of the decentralized derivatives competition, with the former comprising a majority share of the market at more than 90%, while also recording a 450% gain in the past three months in total locked value on its platform.
The report also finds that 95% of derivatives trading volume originate from Asian exchanges and 80% of total market volume is dominated by a handful of eight exchanges.
“The market is easier to access for new investors since derivatives largely mitigate the need for custody. Comparing size relations in traditional spot versus derivative markets indicate massive further growth potential. Automation, fast settlement and execution as well as programmability of financial products post trade are expected to drive demand for derivatives far beyond traditional market levels,” the report reads.
In general, there is a surge of institutional interest and demand for more sophisticated offerings by trusted trading platforms as investors work towards diversifying their portfolios with digital assets. There is a need now more than ever to identify possible opportunities outside of the traditional financial markets given the uncertainty of global economic policies and measures that have been implemented to combat the effects of the COVID-19 pandemic.
US Federal Reserve Chairman Jerome Powell stressed the importance of an inflationary economic policy on Thursday and low interest rates, which led to investors shifting from digital assets and gold back into stocks. However, this momentary setback may not last for long, given that the implications of more stimulus being pumped into the economic machinery have not yet been fully realized.
