On-chain Options Struggle to Gain Traction Despite Growing Perpetual Futures Markets

Crypto investors often face a trade-off when it comes to managing risk: sell their assets or short perpetual futures contracts, taking on funding costs and liquidation risks. On-chain options offer a third path, allowing holders to pay a fixed premium to transfer downside risk to someone else.

Deribit's dominance in the BTC and ETH options market is clear, with $2.5 billion in options volume over the past 24 hours and $27.3 billion in open interest. However, on-chain options trading accounts for only about 0.2% of perpetual futures volume, according to OAK Research.

Options can be used by long-term holders to protect against crashes without selling their assets, or by funds to cap losses on new positions. Traders can also use straddles to profit from volatility itself. Market makers manage directional exposure by trading the underlying asset or its futures as prices move, tying options liquidity directly to spot and perpetual markets.

On-chain options market makers need cheap hedges, fast execution, always-open markets, unified collateral, risk engines and liquidations, professional market makers, order books, and RFQ infrastructure. These conditions are met on newer perp venues that added exchange-grade matching, deeper order books, unified collateral, and institutional-style risk engines.

Options can attract different types of capital, including volatility funds, market-neutral desks, insurers, income sellers, arbitrage desks, and structured-product issuers. On-chain options also price uncertainty across strikes and dates, showing how much investors will pay for protection and where upside demand concentrates.