Research: Cryptocurrency derivatives overtop significantly spot trading volume

Cryptocurrency derivatives surpassed the spot market by trading volume, and this trend will continue in the future, analysts at the Kraken crypto exchange believe. It was triggered by the bitcoin futures launch on CME and crypto winter.

Over the past few years, the role of cryptocurrency derivatives on the crypto market has grown significantly. According to the introduction of a new Kraken study on cryptocurrency derivatives, although pioneers in this area, such as Crypto Facilities, BitMEX, Deribit, BitVC, OKEx, traded cryptocurrency derivatives for several years, 2017 can be considered a watershed moment in this area, when bitcoin futures began to be traded on traditional trading platforms such as Chicago The Commodity Exchange (CME) and the Chicago Board Options Exchange (CBOE).

The report titled “The Tail Wags the Dog: The Evolution of Bitcoin Futures” says that crypto derivatives trading volume skyrocketed in 2018 and 2019, and is now 4.6 times the size of the spot market.

Derivatives play a key role in traditional markets as a tool for sharing risk between the two counterparties. Perhaps that is why, when the crypto market began to decline in 2018, the views of traders turned to this new instrument on the crypto market.

According to Kraken, the average daily trading volume of crypto derivatives jumped almost 200 times between the Q2 2017 and the present time, from $ 95.4 million to $18.9 billion. The most rapid growth was observed in the second half of 2017, when it showed a 15-fold growth.

In Q3 2020, the notional volume of crypto derivatives reached $1.7 trillion.

The study took into account trading volume data from Bitfinex, OKEx, Crypto Facilities, CBOE, Deribit, Bakkt, FTX, HuobiDM, CME, BitMEX, Binance Futures.

From Q2 2017 to Q1 2018, spot volume rose sharply from $58 billion to $570 billion but then dropped significantly to as low as $104 billion. Since then, spot volumes have not fully recovered. To assess the volume of the spot market, analysts accumulated data from Kraken, Bittrex, Binance, Bifinex, Bitstamp, Coinbase, Gemini, Poloniex.

“There are multiple potential reasons for the growth and popularity of derivatives products. One of which is the ability to leverage collateral to magnify returns / losses. This was perhaps particularly more important during 2018, when the price of cryptocurrencies not only fell, but also became less volatile.”


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