Those of us involved in the space of cryptomontage are used to the accelerated nature of this rapidly growing industry. New technology quickly becomes old, gleaming projects lose their luster, and what started out as a few privacy advocates sending each other “magic Internet money” has become an entirely new asset class with a robust infrastructure established around it. Every new product, application or financial instrument we add has value and attracts more participants. Option trading is a big step for the crypto derivatives market, and it is already proving its value.
3 things every crypto currency investor should know about trading Bitcoin futures
How the crypto space has grown
Think back to 2017, before the Chicago Mercantile Exchange or the Chicago Board Options Exchange entered the crypto-currency space with their Bitcoin futures offering. At that time, the most common expression heard (again and again) about cryptomontage was that it is like the “Wild, Wild West”. Lawless, volatile, full of con projects and initial offers of currencies that promised too much and did not deliver enough, or even stealing money directly from investors.
Although Bitcoin had been around since 2009, it was very new to most people at that time. Some of the gains being made were phenomenal, and the losses totally devastating. Many banks said Bitcoin was a scam, including JPMorgan’s (perhaps more famous) CEO, Jamie Dimon, who said it was a fraud in September 2017.
Today, all banks want to (or have already) integrated blockchain technology to improve efficiency and reduce costs. JPMorgan and its boss have made a U-turn, even launching their own JPM Coin to facilitate instant payments.
Major financial institutions in the United States have even opened bank accounts for the major US-based cryptomoney exchanges, while governments around the world are actively investigating or experimenting with their own version of a cryptomoney backed by their central banks.
The point is that cryptomoney can no longer be ignored. With better regulation and decisive action, we have managed to eliminate many of the bad actors and con projects so that the space grows until it is almost unrecognizable.
The rise of crypto derivatives
The derivatives space has now attracted investment from institutional players and, last year, a historic move by a company backed by the New York Stock Exchange to enter the market with its physically established Bitcoin Circuit futures contracts. In fact, the growth of crypts regardless of the up or down markets has been exponential and now, derivatives are leading the charge. However, we still have a long way to go.
The total capitalization of the cryptomoney market is still below $300 billion today. Compared to gold at $9 trillion or the global stock market at nearly $100 trillion, it is clear that cryptomonics is still in its infancy.
When looking at traditional markets, derivatives typically represent more than four times the trading volume of the underlying asset. However, in the crypts, spot trading is even greater. That won’t be the case for much longer. At OKEx, we believe that derivatives will quickly outgrow the spot to become four or five times larger in the coming years. And this growth will be driven by more sophisticated offerings such as options trading.