Sep 6
DeFi 101

Regulatory FUD: Crypto Derivatives Market Showing Resilience

Regulatory FUD: Crypto Derivatives Market Showing Resilience


The crypto derivatives (CDs) market has recently been on the receptive end of regulatory crackdowns in different countries of the world. The crackdowns have raised so many speculations as to whether this signals the exit of the crypto market or a “back to square one”.

Yet the fact remains, despite the FUD around and restricting regulations, the CDs market continues on a steady path of growth.

Only recently, Binance announced that it would no longer offer CDs products in Brazil in a bid to comply with regulations. Binance received the order from the Brazilian securities authorities in July 2020 to stop marketing and trading CDs products within the country.

In a statement to Insider, Binance said, “To respect the Brazilian order, Binance implemented restrictions on our website and stopped marketing on the derivatives products.”

Binance, the world’s largest crypto exchange, has been facing regulatory crackdowns, bans and restrictions on derivatives trading in countries across the globe. Late in June, Binance had announced it would no longer offer its services to users in Ontario, Canada. This was amid the regulatory crackdown also in the country.

Over these past months, there’s been one regulatory restriction, warning or the other across different countries like Hong Kong, Japan, UK and a number of others. These crackdowns ideally are enough to spread negative speculations and doubts about the future of the CDs market. Especially following the announcement late in July by Binance that it was shutting down CDs trading in Europe.

<text-h2>Hope for CDs Market? <text-h2>

However, despite all these, the CDs market has displayed resilience and continued experience growth. Although in general, the crypto market has witnessed a rebound in crypto prices. The prices had initially plunged drastically as of between May and July. Recently, they have now continued to gain momentum with Bitcoin and Ethereum leading the way.

The CDs market has also recently drawn more attention from investors even in the face of restrictions and crypto price plunge. Crypto data from Bybit shows that Bitcoin options open interest (OI) in all exchanges across where it is offered has increased exponentially from $3.63 billion as of June to $9.35 billion as of August 25 this year.

Source: Bybt

The same is observed for Ethereum (ETH) as well. A massive growth in OI for Ethereum options from $169.13 million in June, to a whopping $4.48 billion as of August 18.

Source: Bybt

This recent growth may have also been as a result of institutional players investing in the market. Earlier in May, Goldman Sachs announced the launch of its Bitcoin derivatives trading desks which signaled a positive advancement for the CDs market. The investment bank further announced its expansion into Ether options trading later in June.

Matthe McDermott, Head of Digital Assets at Goldman, in an interview with Bloomberg News, said, “Institutional adoption will continue…Despite the material price correction, we continue to see a significant amount of interest in this space.”

We are seeing a lot of institutional investors coming into the CDs space and it appears it’s not one to stop anytime soon.

While the various regulatory crackdowns may trigger some short-term drawbacks, it only further helps to strengthen the CDs market in the long run. This should be seen rather as an opportunity for growth and maturity of the industry. Institutional investors recognise this and it is certainly a reason they continue to show interest in the industry.

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