Bitcoin Derivatives Market Undergoes Radical Shift as Dated Futures Volume Plummets

The derivatives market for Bitcoin has undergone significant changes over the past five years. The market has grown, institutions have become more involved, and exchanges have introduced more sophisticated products. However, one product that was once a staple of the crypto-native venues where Bitcoin derivatives first took off has almost disappeared.

Dated futures volume across offshore venues tracked by Glassnode is now about 97% below its 2021 level. Options, on the other hand, have expanded from roughly one-quarter of crypto-native Bitcoin derivatives open interest to nearly half, gaining share during four of the five market regimes studied since 2019.

This shift can be attributed in part to the emergence of perpetual futures, which allow traders to keep their positions open for as long as there is enough margin. Perpetuals have become a popular choice for traders who want leveraged Bitcoin exposure without having to worry about contract expiry or roll management.

The growth of options can also be attributed to changes in the collateral underlying the market. Early crypto derivatives were often margined in Bitcoin itself, creating a feedback loop during selloffs where a trader's position could lose money at the same time as the collateral backing it. Stablecoin and cash-like margin have since separated these two risks.

The data suggests that options have become more valuable because they offer a way to alter the risk around existing Bitcoin holdings, rather than making direct bets on the price of Bitcoin. Funds can buy puts instead of selling their Bitcoin, while holders who are willing to give up some upside can sell calls against the position.