Crypto Derivatives Are Becoming Bigger Than Ever


  • Crypto derivatives are becoming a higher priority for crypto companies.
  • FTX founder Sam Bankman-Fried says derivatives products take up most of the company’s time, even as FTX expands into other areas of the market.
  • CME Group (CME) is releasing one of the latest crypto derivatives, an Ethereum (ETH-USD) product coming before the Merge upgrade.
A photo of various crypto coins on a black surface.

Even with all of its downward volatility and regulatory uncertainty, there’s still an allure to crypto investing. It essentially bridges the gap between Wall Street stock trading and placing all of your chips on black at the roulette wheel. Obviously, though, this type of unpredictable price action is not appealing to risk-intolerant investors. So, how can the market hope to accommodate them? The answer: crypto derivatives.

Crypto derivatives, just like any other derivative, allow one to invest in an asset without having to actually own it. This enabes investors to limit their exposure to the volatility of crypto. It’s an appealing middle ground between full-on ownership and complete abstinence from the market. Investors have plenty of options for how to trade these derivatives as well. Futures contracts, options and perpetual contracts make for a tailored investing experience.

Companies have pushed hard for different derivatives products in the past. The ProShares Bitcoin Strategy ETF (NYSEARCA:BITO), the first Bitcoin (BTC-USD) futures contracts for Wall Street investors, didn’t arrive until October 2021. Since then, a handful of other crypto derivatives have cropped up, including Coinbase’s (NASDAQ:COIN) derivatives exchange and FTX’s crypto options and futures products.

Of course, these products are still few and far between. Getting regulators on board with new exchange-traded funds (ETFs) and other modes of crypto derivative investing is like pulling teeth. That much is made evident by Grayscale’s lawsuit against the U.S. Securities and Exchange Commission (SEC), which it opened after being rejected a spot Bitcoin ETF for several years. However, investors will be happy to hear that a renaissance is on the way. That is, according to a leading crypto executive.

Crypto Derivatives Have a Bright Future, According to Sam Bankman-Fried

Investors aren’t the only ones bullish on crypto derivatives products. Executives are also keeping their ears to the street to know exactly what people want. In particular, FTX founder and CEO Sam Bankman-Fried is keen on expanding traders’ options when it comes to crypto.

Bankman-Fried last spoke about the derivatives market on a Decrypt podcast. The executive says that FTX’s derivatives products take up a vast majority of his attention. “It’s been the single biggest ask of our customers as long as I can remember,” he claims.

FTX actually began as a derivatives platform before becoming an ecosystem for crypto, non-fungible token (NFT) and DeFi investing. Still, these comments may surprise some. FTX has been on an aggressive bailout campaign in the wake of the market crash; its priorities (as far as news is concerned) seem to be in other corners of the market. So, the fact Bankman-Fried is still largely focused on derivatives speaks to the overwhelming –and still growing — demand in that sector.

Evidence to these claims is news of a new crypto derivatives product being introduced by CME Group (NASDAQ:CME) in September. The company already has a Bitcoin options product. Now, CME is releasing an Ethereum (ETH-USD) futures product as well. The rollout of this new product will come days before ETH’s highly anticipated Merge upgrade. CME says this decision comes after seeing a massive upswing in volume across its Ethereum “micro-sized” options product.

On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.

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