Bitcoin’s derivatives market is growing rapidly, but it still has a long way to go to catch up with traditional markets. According to Matthew Sigel, Head of Digital Assets Research at VanEck, Bitcoin derivatives are only 4.3% of its underlying market, while equity and commodity derivatives are 279 times larger than their respective markets.
This significant difference highlights the immense potential for growth in Bitcoin’s derivatives market. The recent approval of options trading for BlackRock’s iShares Bitcoin Trust (IBIT) by the US Securities and Exchange Commission is expected to further drive this growth. IBIT is one of the most liquid ETFs in the country, and the introduction of options trading is likely to attract more liquidity and institutional investors to Bitcoin.
Despite the growth, the Bitcoin derivatives market is still relatively small compared to traditional markets. In September 2024, monthly crypto derivatives volumes reached $1.33 trillion, surpassing spot markets. Bitcoin and Ethereum are the most commonly traded assets in the crypto derivatives market.
Regulatory acceptance of Bitcoin is on the rise, signaling increasing legitimacy for the cryptocurrency in traditional finance. New products such as physically settled options and non-deliverable forwards are also driving innovation in the sector.
The significant gap between Bitcoin’s derivatives market and traditional markets presents a huge opportunity for expansion. With institutional adoption and market maturation expected to drive growth, Bitcoin derivatives could potentially catch up with their traditional counterparts in the future. This suggests that the future of Bitcoin derivatives market is bright, and there is still a lot of room for growth and development in this sector.
