Crypto options trading has seen some significant developments in recent months, with new platforms, regulatory changes, and innovative protocols emerging in the market. At Amberdata, we help you stay up-to-date on these developments and trends so you can explore opportunities and make informed decisions. Today we take a look at big growth at Deribit; Bumper, a new protocol that its founders believe offers less expensive crypto hedging than options; and an expansion into derivatives for Kraken.
Deribit is a leading centralized crypto derivatives exchange, offering futures, perpetual swaps, and Bitcoin and Ether options. It has a roughly 90 percent market share in crypto options; traders like its trading dashboard, low latency, and consistently high liquidity.
In August, Deribit saw a 17 percent growth in crypto derivatives trading volume, to $42 billion. This came against the backdrop of a 12 percent decline in global crypto derivatives volume, which fell to $1.6 trillion. Options trading primarily drove this jump, with options tied to Ether recording their highest volumes since March.
During August, Bitcoin prices were volatile, ranging between $25,000 and $30,000. These price swings led to large derivatives liquidations, as well as increasing demand for hedging strategies. Deribit's Bitcoin implied volatility index (BTC DVOL) reached 53 percent.
On September 7, Bumper, a decentralized finance protocol, launched a bid to undercut Deribit Crypto Options, hoping to gain a large cut of the $13 trillion crypto options market. Backed by $20 million in R&D funding, Bumper offers option-like hedging protection at roughly 30 percent less than hedging via the use of puts. The protocol’s founders claim Bumper is the greatest innovation in options since Fischer Black and Myron Scholes created their ubiquitous pricing model fifty years ago.
Bumper's innovation is that it offers a new way to protect crypto assets from market meltdowns and extreme downside volatility. The way it works is that when you buy protection from Bumper you set a floor price at which you wish to protect your crypto, essentially quantifying your risk. If the market crashes, your crypto doesn’t fall below that price. Conversely, though, if the market rises, you capture the gains. Bumper refers to this as “bumpering your assets.”
Bumper also pays between three percent and 18 percent APR to liquidity providers that supply USDC to the protocol, and early adopters of the protocol can share in $250,000 of various incentives. Bumper works with any ERC-20 token, is deployed on the Ethereum mainnet, and is currently building on the Avalanche, Binance Smart Chain, and Near blockchains.
Earlier this month, Kraken, the world’s third-largest crypto spot exchange, announced plans to expand its services in the crypto derivatives market, presumably to try to capture some of the derivatives volume available following the collapse of FTX. The derivatives sector is a lucrative market, with $1.85 trillion in trading volume across centralized exchanges in the month prior to the announcement.
With the expansion, Kraken's London-based subsidiary, Crypto Facilities, plans to broaden its custodial services and offer fiat-denominated futures, and is in discussions with the U.K.'s Financial Conduct Authority (FCA). Kraken acquired Crypto Facilities in 2019, and the firm separately registered with the FCA in 2021 for crypto custody. Currently, Crypto Facilities offers institutional investors leveraged and cash-settled futures contracts for Bitcoin and Ether.
Crypto Facilities CEO Mark Jennings anticipates that this expansion process could take between six and twelve months. In addition to expanding its crypto derivatives offerings, Kraken has also introduced PayPal deposits for its U.K. and European customers, widening its payment methods and catering to a broader user base.
Kraken's moves to broaden its payment and trading offerings come at a time when multiple U.S.-based crypto platforms are looking into global expansion in response to increased demand and market opportunities, as well as continued regulatory uncertainty in the U.S.
Staying on top of developments in the options market can be a time-consuming job. But Amberdata can help you do that with research and commentary provided each month in our blogs, resource library, guides, and primers, as well as with our comprehensive and granular digital asset data services.
Amberdata provides data solutions for derivatives such as options, futures, and spot trading. Whether you’re a financial institution just entering DeFi, a seasoned crypto-native looking to expand, or a Fintech looking to build or enhance products, Amberdata has digital asset data solutions to meet your needs.
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