The crypto derivatives market is one of the developments in the cryptocurrency sector that opened a significant door for institutional traders to participate in crypto trade. Before the introduction of bitcoins futures contract in December 2017, most of the people who traded cryptocurrency were individual traders, who mostly made a profit if the price of bitcoin appreciated.
However, as institutional players became involved trading crypto, the need for market instruments that will mitigate risk became necessary. This need was one of the propelling factors that gave birth to the market of bitcoin derivatives, with the likes of CME(Chicago Mercantile Exchange), and CBOE(Chicago Board Options Exchabitcoin futures) launching bitcoin futures in December 2017.
How has the market fared since the introduction of derivatives?
The introduction of crypto derivatives opened the door for big institutional players to become involved in crypto trade. This development is useful when you look at how this has given cryptocurrency more prominent visibility. People have started viewing cryptocurrency use cases for efficient payment management. This could improve overall fiscal responsibilities.
However, along with the benefits of the crypto future markets, comes an additional burden. People can now speculate and profit in any direction, including a decline in the price of the cryptocurrency. Some analysts have said that the bull run experienced in 2017 was mostly possible because there were no crypto derivatives. This consideration could be valid when considering that the price of bitcoin has never reached that high since the advent of bitcoin futures.
Also, there is usually some significant volatility in the market anytime one of the significant future contracts are closing or opening. Therefore, with the CBE future contract closing this Friday, some market observers are predicting volatility in the price of bitcoin, as institutional investors balance their portfolios, and reassess their strategies.
Source: Cryptonews
