CopperCasts - Jakob Palmstierna, Partner, GSR


Video title: CopperCasts – Jakob Palmstierna, Partner, GSR



Cryptocurrency derivatives have surpassed spot volumes in June and this is considered as a sign of maturity in the traditional market. Derivatives are used by institutional investors to manage risk and tailor their exposure. The growth of derivatives and options markets has been exponential over the past two years and the trend is likely to continue. The growth is driven by macro traders, hedgers such as miners and token issuers. 


As crypto assets are seen as not only about Bitcoin, but also as technological innovation, the derivatives and options markets for these assets are seeing the biggest growth. Over the next one to two years, options market will likely exceed spot market as well.




After a strong bull run in digital assets, we have seen the market sold off a little bit and settled around 30,000 with lower volumes. 


One interesting feature have emerged in June which is to have been reported that cryptocurrency derivatives in terms of volumes are now superseding the spot volumes.


So why is this? Part of it is speculation and leverage, but a more interesting aspect of it is the sign of maturity in traditional market. Derivatives generally outsize spot markets and it’s a tool for institutional investors to tailor exposure and manage risk. 


We think that over the years to come, derivatives and options markets might outsize the spots markets. 


So let’s take a look at the growth of these derivatives and options markets. This first chart shows the growth of derivatives volume over the last two years and as you can see, the growth has been exponential and haven’t fallen off that much over the last few months. You can see a similar picture in the options market, although these are still a fair bit smaller than the derivatives markets. So who are the players that give rise to this growth outside of retail investors? 


Macro traders being one of them, they prefer to tailor their exposure using derivatives and options. Another one are hedgers such as miners that are using the derivatives markets and their options market to manage their cash flow. A third one being token issuers, who will use derivatives and options to manage their treasury. Sort of like a corporate client in traditional finance. As investors have realized that crypto is not only about BTC, but that a real disruption and technological innovation is happening in other assets. The derivatives and options markets of these are the ones that we’re seeing the biggest growth in at the moment, both on exchange but also on the OTC market. So this month we have seen derivatives exceed spot in terms of volumes. Looking forward and looking at the maturity of the industry, we will most likely see the same thing happen in options, most likely over the next one to two years. I’m Jacob Ponsteino, I’m a partner at GSR.