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Welcome to the AD Derivatives podcast led by Director of Derivatives; Greg Magadini.     Featuring: Pankaj Balani, CEO & Co-Founder of Delta Exchange


In this episode, moderator Greg Magadini speaks with Pankaj Balani (CEO/Co-Founder of Delta Exchange), to chat about his background, the future of crypto options markets, how to think through possible growth, and retail demand for crypto options.

Delta Exchange is the second biggest crypto options exchange by volume and offers innovative derivatives products. Offering daily, weekly, and monthly expiry in Bitcoin & Ethereum options.

You can view instruments, risk management tools, and Delta Exchange's crypto options activity on the Amberdata Derivatives App.

Crypto options growth in a bear market

Though it may seem counterintuitive, Balani believes that bear markets are ideal for new financial products, like options, to gain traction. When markets are down, traders and investors seek out new opportunities to generate returns. For example, Bitcoin and Ethereum futures first gained traction during the 2018 bear market. 

Looking at TradFi for more historical examples, Balani cites the mini S&P 500 options product launched by CME Group in 2013. Though markets were largely range-bound in the years after the 2008 financial crisis, these new options saw an impressive 50–70x growth rate over six years, becoming CME's most popular product for years and demonstrating how options trading products can thrive in bear markets. 

Crypto options market trends

Magadini also spoke with Balani on some trends he’s seeing in the options market right now.

The shift away from altcoins

Those who have traded on Delta Exchange before may have noticed that some of the altcoins the exchange initially offered have been sunsetted—at least temporarily. Balani explains that demand for altcoin options like Solana and Avax have declined during the bear market as traders instead focus on major cryptocurrencies like Bitcoin and Ethereum, likely for the next two years.

Daily options gaining popularity

Daily options now make up nearly half of the traditional options market, indicating increasing retail trader interest and activity. Balani believes crypto options will follow a similar pattern, skipping monthly options and going straight to daily options. The infrastructure and behavioral norms already exist in crypto to support short-term options trading, so daily crypto options volume could grow very quickly. 

Retail vs. institutional trading trends

Looking again to TradFI, Balani notes that while institutional investors do participate in options markets, 50 percent of options activity on public exchanges comes from just seven retail brokers. Meanwhile, most institutional options trading, close to 200 percent, occurs bilaterally or over-the-counter—not on exchanges. Balani believes we could see a similar trend emerge with crypto options, where initial public exchange activity comes from retail traders, while institutions favor over-the-counter transactions. 

Balani is confident that major growth in crypto options lies ahead over the next few years. He envisions short-term options tailored to retail traders driving this initial growth, while longer-term OTC options eventually gain more institutional interest and participation as well. The foundations for rapid crypto options adoption are already in place, even if the market itself remains lackluster.

Overall, Balani is optimistic about retail-fueled growth, with short-term options poised to lead the way, benefiting both retail traders and the platforms that serve them.

Could crypto options outpace crypto futures?

In TradFi, options markets are generally much larger than futures markets, making up about 55 percent of derivatives activity. In DeFi, however, crypto options are currently less than two percent of crypto derivatives volume, indicating huge room for growth. 

To quantify the growth potential for crypto options, Balani compares options activity to market capitalization. For Bitcoin, the ratio is 0.75, and for Ethereum it's 1.5. But for major equity indices like the S&P 500, the ratio is 30, indicating crypto options could grow 30 times from current levels. Balani believes this kind of growth isn’t out of the realm of possibility, given the 100x growth crypto futures experienced between 2019 and 2021. 

Balani sees crypto options as an area that will "stand out and explode" over the next two years. He notes that the foundations for this growth are already in place; crypto options just need time and increasing adoption to reach their full potential. From where he sits, the table seems set for options to become a major part of the crypto derivatives landscape over the next couple of years.

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