As the value of cryptocurrencies keeps increasing year over year, more investors seek exposure to these assets. Derivatives offer an enticing option, as they do not require users to store the crypto-assets themselves.
Unfortunately, in the United States, crypto derivatives remain a somewhat controversial topic, although recent developments offer hope to investors and institutions.
Derivatives-Based Bitcoin ETF Approval
Derivatives are an exciting investment vehicle that has remained largely inaccessible to US investors over the years. Regulatory concerns have prevented such vehicles from being offered, although that situation has come to change in recent months.
The ProShares Bitcoin Strategy ETF (BITO) went live on the New York Stock Exchange in October. It marks a crucial development for the crypto derivatives industry, as it is the first exchange-traded fund tied to Bitcoin that gained SEC approval.
More importantly, BITO noted almost $1 billion in natural volume on the first day, confirming that individual and institutional investors had waited for such an opportunity.
Through the ETF, investors can get exposure to derivatives from Bitcoin futures contracts rather than the BTC price itself.
The introduction of derivatives exposure helps investors shield themselves from the ongoing volatility affecting the BTC price.
That may prove a necessary step for bringing in institutional investors. Moreover, the US’s approval of such a trading vehicle can allow more players to enter the market.
Speaking of other players, Coinbase wants to begin trading crypto derivatives and futures on its platform. That confirms the demand for Bitcoin exposure through derivatives.
To date, the company has applied with the National Futures Association. In addition, FTX.US, one of the up-and-coming exchanges, acquired the US’s first approved crypto derivatives platform not that long ago.
So the industry seems to be heading in an exciting direction, although there is still much work to do.
What Does The Future Hold?
It is always tricky to look forward where cryptocurrencies are concerned. Anything can happen in this industry, and change will sometimes occur when enthusiasts least expect it.
For derivatives trading, there are still many opportunities to explore, including the focus on decentralizing the trading process and supporting cross-chain products, among other things.
A project like SynFutures aims to build the next generation of derivatives for any blockchain.
Moreover, the company provides exposure to NFTs, fungible crypto assets, and access to Bitcoin Hash Rate Oracles.
As the platform notes a substantial increase in volume – over $242 million in the past week – there is a visible demand for access to such derivatives and products.
More importantly, the platform lets users list and trade any futures contracts based on crypto assets, altcoins, indices, NFTs, or real-world assets.
Democratizing access to the creation and trading of futures will usher in the next generation of derivatives for the blockchain and crypto enthusiasts.
It also paves the way for institutional and individual investor support once the infrastructure has been established and battle-tested.
There are many reasons to be excited about crypto derivatives in the United States.
The first ETF’s approval marks a significant milestone and sends a signal to other countries to take a similar stance on this matter.
More importantly, ongoing development and innovation from within the industry can help establish new ideas, products, and services to bring in more investors, either individuals or institutional level players.