The Block Research was commissioned by FalconX to create “Crypto Derivatives: State of the Market”. To access the full report in PDF format, please fill out the form below:

Executive Summary

This report provides key insights into the state of the crypto derivatives market. Section 1 starts by highlighting the increasing inflow of institutional capital into the crypto space. It then outlines the main crypto derivative products and their differences to those in the traditional finance space.

Section 2 takes stock of the state and recent developments in the crypto derivatives market by looking at the four key metrics i) volume, ii) open interest, iii) funding rates, and iv) implied volatility. It provides several insights:

Both volume and open interest metrics indicate that the crypto derivatives market has grown considerably;

Activity in crypto options relative to futures is set to grow strongly if ratios of options to futures for (i) open interest and (ii) volume converge to those found in the traditional finance space;

Activity on the crypto derivatives market continues to exceed that on spot markets, indicating some degree of market maturation;

Implied volatility is still relatively high in comparison to equity markets, but continues to trend downwards, and funding rates have been compressed.

Section 3 sheds light on the major derivative trading venues, which are providing the infrastructure that makes possible the strong growth in the crypto derivatives space. It is shown that most crypto derivative venues are of a centralized crypto-native nature. In addition, it is discussed how liquidity network service providers give investors access to aggregated liquidity from crypto exchanges and OTC venues to address liquidity fragmentation. This aggregation may result in better liquidity, transparency, and pricing.

Section 4 concludes and provides an outlook on future growth and developments in case there is further regulatory scrutiny.