Where is the multi-billion dollar cryptocurrency derivatives market headed?

Despite the rise of the packaging industry in the cryptocurrency derivatives industry,However, compared to traditional financial markets, the tools and procedures of this market remain unclear. Given the level and quality of the infrastructure developed over the past year and the increased participation in the organization, we believe that 2022 will be a year of rapid development for crypto derivatives as the trading of the industry is maturing. This article will focus on the current state of the economy, key infrastructure that should drive growth, and areas where that growth is needed.

Recipe

Today, cryptocurrency futures and options (“F&O”) represent 57% of total monthly commodity trading. While this volume is generally strong, we can gauge market growth by its relative split between devices and installs. Although most of today's commodities focus on trading amid future trading, options and related commodities are still new. As a base, the crypto options trading volume ratio for the site is around 2%, which is around 35 times the US stock market.

Also, the decentralized derivatives market for futures and options did not fare any better compared to middle-class participants. The table below shows the relative market concentration.

We anticipate two factors leading to further growth in cryptocurrency derivatives trading volume in 2022: 1) an increase in the impact rate and 2) an increase in internal participation. An attempt to better understand the latter is to understand why TradFi companies use derivatives more than trading products.It can be divided into four major groups.

Capital efficiency: Margin trading is the long-term investment because the potential falls below average leverage.

Tax efficiency: In the United States, 60% of the income from a contract is taxed on the basis of long-term income, regardless of the duration of the contract. increase in capital.

Hedging: Derivatives allow organizations to manage long-term cash flows while protecting them.

More Liquidity: Derivatives markets are more profitable because manufacturers can move in and out of risk, making the market more liquid.

2021 will see significant system improvements to provide better support and sharing of internal investments (details below) and increase organic interest in the crypto industry. Naturally, internal participation further reduced relative volatility and improved derivatives trading. Additionally, as more organizations hold crypto assets on their balance sheets, derivatives will become more important for short-term protection. The combination of these events constitutes the best possible storm that is expected to drive the crypto derivatives market over the next 12-24 months.

All in all, we expect 2022 to be the year of cryptocurrency derivatives.There are three main things.

The rise of centralized and decentralized selective infrastructures.

The volume of decentralized perpetual contracts is increasing.

Continuous development of new cryptographic primitives such as process vaults, permanent options, etc.

Centralized infrastructure

Most goods today are found in the middle of nowhere, the majority from eternity. Historically driven by BitMEX in 2016, perpetual monthly BTC ETH turnover is around $2.5 trillion, led by Binance, CME, FTX and more.

We expect this volume to continue to grow as more participants enter the market, as the medium of exchange provides the regulatory and regulatory framework necessary for these players. As the future Perp market continues to grow, we expect options platforms to follow suit. With $35 billion in monthly share of the BTC ETH stock market, today the crypto options market is still in its infancy compared to the Deribit-dominated perps market.

Perhaps the main reason for this is that the historical volatility of most coin markets makes the future an appropriate vehicle for traders to express their views. Additionally, options did not meet defense requirements, as historically multiple groups were involved holding cryptocurrencies on their balance sheets. We expect both of these situations to change as home engagement increases. As all cookies continue to grow over the next 12 months, we expect more participants to enter the basic options market to meet growing demand. I think October got LedgerX by FTX is the start of this difference.

As the industry has grown, investments have increased in many areas of achievement and capital gains. As a result, joint ventures such as cultural concepts will become more prominent in the construction industry to promote home partnerships. Paradigm allows organizations to submit anonymous tenders for future approval and trading options with KYC partners. As more and more financial companies are entering the crypto space today, we believe this process will simplify their involvement and lead to significant growth in the packaging industry.

Distributed infrastructure

Similar to centralized counterparts, decentralized derivatives trading volume is dominated by perpetual futures. Modern decentralized perp trading volume, pioneered by perpetual protocol and more recently by dYdX, often hovering around $5 billion. Despite strong growth over the past three months, decentralized perp exchange volume accounted for less than 1% of all cryptocurrency derivatives exchange volume. We expect significant growth in these areas over the next 12 to 24 months.This is usually driven by three factors:

Interaction with other DeFi applications: The value supported by these platforms will continue to grow as other applications and processes come online and establish traditional contracts.

Lower Cost / Faster Performance: Faster chains such as Solana and Ethereum scaling solutions such as Arbitrum, Optimism, and StarkEx/Net should provide lower cost and better user experience to attract more commercial customers. A good example is the recent use of dYdX's StarkEx examples, which increased the number of channels and reduced the exchange rate by a good 10 in the last 3 months. We believe we are in the early stages of EVM and other scalability and hope these solutions will make the decentralized derivatives trading experience much smoother over the next 12 months. Projects such as HXRO have already begun to lay the groundwork for the development of an on-chain decentralized future and options such as Solana.

Open Website: Unlike central sites, decentralized procedures are not allowed. As access to cryptocurrency continues to grow and reach increasingly remote parts of the world, we expect some users who do not have access to central media to begin to be affected in the worldwide through decentralized processes.

As the decentralized market in the future continues to grow, we expect market options to follow suit. Today, industrial derivatives represent only a small fraction of all industrial derivatives, and the largest derivatives are available on the Ethereum mainnet. However, three long-needed elements to prevent the growth of some decentralized marketplaces are beginning to emerge as solutions that should be useful in the future.Lock this business within 12 months:

Cost: According to a creative, transaction fee of the selected contract will have the significance of the market. TIQHIAN TRUCKENCLY is always possible for choosing the guardian in the negative prayers. Especially, the transaction of various bridges, with the outside period will result in an unacceptable (multiple branches) at the cost of killing. Custom Custom Care Price is a sensitive value.) If the business is not atoms. Both the situation is based on the models of difficult decisions for the book. In addition, the procedure that allows levels that must be removed on the other party in danger. Includes this involvement if the air requires a high rate to erase the job and reduce the risk of platform. In order to reduce these situations, the contract should indicate the high percentage of the long-term commercial process. Solar and refault and Starkware, we have cheap price, easy to reduce these problems and support options.

Short-term contracts often require income to obtain these jobs. Most operate from the AMM model to access this performance. However, this often extends the lake to unprotected delta risk (hedging ratio), which can lead to gains and losses. Following these incidents, processes such as Ethereum's Charm temporarily delayed the selection of previous products. Like the suppliers selected by TradFi, the selection process requires a delta coverage (coverage ratio) of the lake water in order to minimize losses. This is usually done in the future, which until recently was new advertisement for DeFi. As these principles endure, we hope the selection process will make water more efficient and operational.

Many existing applications of the DeFi option require full liability due to the aforementioned time blocking and inability to set up atomic clearing. With a more powerful removal engine making the chain faster than Solana and changing the market more often, we expected systems like ZetaZeta to offer more secure options.

Another building block that needs to be accelerated to accept shard options is the Structured DeFi Options ("DOV") library. DOV is a game-changer as it democratizes access to implicit volume-based organic results, while providing effective ways to manage non-linear risk. With simple strategies like making phone calls and paying cash, DOV sites offer retailers a way to protect their cash back and put revenue into gossip deals. The TVL options platform like Ribbon has grown by $300 million, while new venues like Friktion (over $100 million TVL) and KatanaKatana (over $45 million) have grown rapidly over the past few years. weeks of release on the market where the energy shows satisfaction. As these regulations continue, we hope that the options available to the industry will be better.

All in all, the decentralized options boom level has finally been established, and we expect more money to be in the pipeline over the next 12 to 24 months, especially from outsourced solutions. Solana and Ethereum scale.

In addition to future decisions, options, and product design, we're excited to see new crypto-based products like options continue to improve in the sandbox. Inspired by a successful futures business, Dave White and Sam Bankman-Fried prepared the options in their original form. Perpetual options can be repeated using a basket of options with different time periods taking weight. Here, each option measures the weight of the included number (e.g. 50% contract expires today, 25% contract expires tomorrow, etc.). Printing is also easy. Processes like 0101 also use floating resistance values, which are a measure of the average value of an asset over a period of time, allowing all values ​​to float together forever and ever to maintain their status. Finally, we have also seen the emergence of platforms like Deri, which have eternal life and everlasting options and allow users to trade perks like DeFi – race. chain. We look forward to seeing more of these items on the mainnet soon.

Therefore

We strongly believe that commercial decentralized derivatives are poised for phenomenal growth over the next 12-24 months. Renovation is in place to bring this product to market and support multi-thousand dollar contracts for the next generation. As we enter 2022 (ParadigmParadigm, Zeta MarketsZeta Markets, FriktionFriktion, LyraLyra, DriftDrift, etc.), we are excited to support the most important work driving this revolution.