The crypto market, which is hybrid of the financial and technology sector, is making so much progress that institutional investors have now taken a seat at the table. The interest of these big-time players into the industry has led to the introduction of other types of financial instrument. Most of these instruments, called derivatives, are used to hedge risk.
The crypto futures market started in December 2017 by CBOE(Chicago Board Options Exchange) with the introduction of bitcoin futures. This advent has expanded the scope of trading in cryptocurrencies. Before their entrance, most traders only thought of benefiting from a price increase. In contrast, traders in other advanced markets can predict price in both directions.
The demand for more crypto derivatives product has propelled other exchanges like BitMEX, AvaTrade, OKex etc. to launch their derivative products. For those that may not be so familiar with the concept of derivatives, derivatives refer to a financial instrument that gets or 'derives' their value from another asset.
As at today, the crypto derivatives market has hit a new record of $602 billion subscriptions for May 2020. This has also pushed the market share for derivatives trades from 27% in April, to 32% in May.
Even though the spot market still has the highest trading volume, the derivatives market fared better in percentage growth, for May 2020. Exchanges like Binance, Huobi and OKEx accounted for about 80% of trading volume combined in May.
So how will this development affect the retail trader? Recently, some analysts stated that there is likely to be an increase in bitcoin price volatility following the expiration of futures contracts of one of the major crypto derivatives platform. How this will play out, as the derivatives market takes more market share is what we will find out as we progress.
Source: Cointelegraph
