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The cryptocurrency market has experienced two major waves of development, which are Spot Trading and Futures Trading. The potential third wave of this market is supposed to be Options Trading. A growing number of traders are taking an interest in options, a derivative product that not only protects their assets, but also allows them to profit exponentially.
There is strong evidence that options trading is indeed the third wave that is sweeping the cryptocurrency market in 2023. Here are some examples:
1. Financial Expert Evaluation about Derivatives Options
Mr. Greg Magadini, Director of Derivatives Department at Amberdata, a leading blockchain and crypto data platform, predicts that DeFi options will usher in a "new era" and take the cryptocurrency market to new heights.
In December 2021, Goldman Sachs experts assessed that the options market would be a significant milestone for the cryptocurrency market. Andrei Kazantsev, the global head of cryptocurrency trading at a multinational investment bank, also believes that the next step for crypto is to create options markets.
2. How strong is the data showing about options development?
According to the latest data from DeFi Llama - a tool for statistics and monitoring of the entire decentralized finance market, the total value locked (TVL) of the top 10 DeFi options markets alone has reached over $180 million. The trend of trading options is clear and increasingly popular.
Although January 2023 was considered a rather sluggish period for the cryptocurrency market, it marked the beginning of an explosive period for options trading. The trading volume of ETH options on Deribit reached a record high of $5.4 million in January 2023, a 36% increase compared to December 2022. The trading volume of Bitcoin options also increased by 10% compared to December.
3. Options DEX and Options CEX trading platforms: Which is better?
CEX (Centralized Exchange) is a centralized trading platform built on the CeFi model. With CEX, users need to register on the platform, create an account, deposit funds, and usually need to verify their identity (KYC) to be eligible to trade. Therefore, users' assets are often controlled by the platform.
DEX (Decentralized Exchange) is a decentralized trading platform built on the DeFi model. Unlike CEX, DEX platforms do not require users to create an account but only need to connect to a DeFi e-wallet (e.g., Metamask, Trust Wallet, etc.) to start trading. When trading on DEX, users are usually more assured because they have complete control over their assets.
Although CeFi is more recognizable to customers because they are given wallets when they register, trade volume on DEX platforms hit a whopping $32 billion just 7 days following the FTX bankruptcy. Many DEX platforms reported a sharp increase in trading volume shortly after the FTX bankruptcy: Uniswap tripled its trading volume from $1.3 billion to over $4.2 billion in just one day after the FTX bankruptcy; Curve doubled its trading volume from $700 million to over $1.3 billion in just hours after the bankruptcy of FTX. This collapse also resulted in a withdrawal frenzy from CEX platforms, prompting investors to rely more heavily on DeFi wallets. Following FTX's insolvency, the number of new bitcoin wallet addresses soared to 151,212 in a very short period.
DeFi is thought to be more flexible and transparent than CeFi. According to Mr. Magadini's most recent prediction, the combination of DeFi and derivatives will continue to grow dramatically in 2023, particularly in options trading. He even believes that if investors learn to read the market and grasp trends, everyone will want to trade DeFi options, and the cryptocurrency market will enter a new era.
4. Deribit vs. DBOE - The two most prominent representatives in the battle between CeFi and DeFi Options.
Deribit is currently the most popular centralized options exchange (Options CEX) for cryptocurrency options, but still has many limitations such as a relatively difficult-to-use interface, which is almost only suitable for financial professionals and investors. In addition, as a CEX platform, Deribit still poses risks for individual investors, especially after the collapse of many exchanges such as FTX last year.
DBOE or DeFi Board Options Exchange is a DeFi options exchange (Options DEX) with significant improvements and breakthroughs.
With the nature of a DeFi exchange and the introduction of price spread features, DBOE allows investors to fully participate in options. Users are not only fully in control of their assets, but in options, investors are also provided with transparency of Long/Short positions of Call/Put options. DBOE also introduces traditional European options to the cryptocurrency market, creating breakthroughs and being friendly to investors.
The interface design of DBOE has received many compliments from investors for its elegance, simplicity, and ease of use. Investors only take less than 15 seconds to get acquainted with and use the platform. Recently, DBOE has also partnered with Chainalysis' KYT solution to promote compliance and meet AML and TF regulations, enhancing user and investor protection.
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The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.