People are more interested in Ethereum than Bitcoin

Sajjad Hussain
Jun 22 · 7 min read

Ethereum options have performed very well this year. In the past two months, Deribit (the largest market for these options) has reached US$158 million, breaking the US$150 million mark for the first time.

Although Ethereum initially only provided wallet services for users of the Ethereum platform for use with applications developed on the platform, recently Ethereum has become an obvious competitor to Bitcoin, and Ethereum is the second largest cryptocurrency by market value .

The emergence of ETH options

ETH options mainly appeared in March 2019, when Derbit was on its exchanges, including options, futures and perpetual contracts. About a year later, after the halving of Bitcoin and the general increase in cryptocurrency prices in 2020, Ethereum options have become a major development area in the altcoin sector.

In order to seize this new opportunity in the market, the Chicago-based cryptocurrency exchange ErisX was launched in the second quarter, and it will even be regulated by the U.S. Commodity Futures Trading Commission. Even the Malta Exchange has been involved and has attracted trading markets since its launch in June.

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According to the observation by crypto derivatives analysis firm Skew in February, when ETH is pegged to BTC, investors have grown in the market. Observing the 6-month ETH/BTC spread, the parity implied volatility rose to a 6-month high of 22%. Implied volatility is the standard deviation of traders’ predicted returns, and it represents the market’s expectation of the asset’s future risk. This peak indicates that investors expect the percentage change in ETH price (in either direction) to be higher than BTC in the next six months.

Growth is not isolated

The phenomenon of Ethereum options rebounding in the second quarter is not unique to altcoins. It generally goes hand in hand with BTC options and crypto derivatives. In May, the trading volume of the cryptocurrency derivatives market hit a record high of $602 billion. Interestingly, after May, investors’ interest in BTC futures (the largest BTC derivative) began to decrease.

On June 12, BTC futures fell to a 2020 low, while the open positions of Ethereum options continued to rise to record highs. Deribit Chief Commercial Officer Luuk Strijers discussed with Cointelegraph the growing interest in Ethereum options. He said:

“Since mid-March, due to price performance, new companies entering the options space, and partners increasing sales, we have seen increased interest in ETH options. Open positions have reached historical highs, approximately $157 million, in total About 660,000 contracts, of which 279,000 (42%) will expire on June 26, 2020.”

Although the impact of the introduction of ETH2.0 is subtle, as it will affect miners and investors in different ways, the market prospects seem to be positive about this change, which is also beneficial to the market and investment after BTC halving The interests of the person. Strijers further added:

“We also see increased interest in over-the-counter (OTC) trading leading traders to hedge in Deribit, which may be related to investors’ interest in ETH halving after BTC halving and the upcoming ETH 2.0. Investors seem to be The potential gains are appreciated, which may be one of the reasons for the increase in the price of ETH since March. Investors believe that the mortgaged Ethereum will reduce the overall supply in the market and push up the price of ETH.”

“We also see increased interest in over-the-counter (OTC) trading leading traders to hedge in Deribit, which may be related to investors’ interest in ETH halving after BTC halving and the upcoming ETH 2.0. Investors seem to be The potential gains are appreciated, which may be one of the reasons for the increase in the price of ETH since March. Investors believe that the mortgaged Ethereum will reduce the overall supply in the market and push up the price of ETH.”

Use of smart contracts and decentralized finance

As said, “Ethereum is a decentralized platform for running smart contracts.” Smart contracts run on the Ethereum virtual machine and are a tool that helps investors trade assets in a transparent and conflict-free manner without the need for intermediaries. service. Therefore, smart contracts enable Ethereum to become a distributed computing network with multiple usage scenarios. These combined with the decentralized financial ecosystem can also increase investor confidence and encourage institutional participation.

The rise of altcoins such as ETH, Komodo (KMD) and Cordano proves that cryptocurrency investors are looking for other speculative channels besides BTC. Cointelegraph interviewed Nobert Goffa, the executive manager of the blockchain storage system ILCoin, and he commented:

“It’s only a matter of time before the launch of Ether Options. For the entire market, this is a good sign. More new users and classic tools mean good financial performance for crypto exchanges, thus creating a favorable news background. Ultimately, this has Helps integrate cryptocurrencies into the current economic system.”

“It’s only a matter of time before the launch of Ether Options. For the entire market, this is a good sign. More new users and classic tools mean good financial performance for crypto exchanges, thus creating a favorable news background. Ultimately, this has Helps integrate cryptocurrencies into the current economic system.”

Investor asset transfer and borrowing

Cryptocurrency lending is the key to pushing Ethereum’s decentralized financial ecosystem to exceed $1 billion in locked value. In essence, this means that borrowers can use their encrypted assets as collateral to obtain loans in fiat or stable currencies, while lenders provide the assets needed for loans at agreed rates.

According to Darius Sit, the managing partner of crypto asset trading company QCP Capital, the company has seen a large number of investors move from borrowing to options, and the market is clearly evident in the credit risk from borrowing to highly unregulated, crazy refinancing platforms , Far exceeding interest income. Regarding the feasibility of choosing an option in this unregulated loan situation, Sit further commented:

“With options, people can generate higher returns than borrowing. One can also better control the level of risk. With borrowing, one may lose all the amount of the loan due to default, and the multi-layer remortgage loan from the collapse Only a few steps away. With options (with proper risk management), you will get greater returns and the ability to reduce downside risks.”

“With options, people can generate higher returns than borrowing. One can also better control the level of risk. With borrowing, one may lose all the amount of the loan due to default, and the multi-layer remortgage loan from the collapse Only a few steps away. With options (with proper risk management), you will get greater returns and the ability to reduce downside risks.”

Concerns about platform defaults and high interest rates have also prompted a general shift in the perception of options. Sit further added that if the price of cryptocurrencies does not pick up as quickly as it fell on Black Thursday in March, some lending platforms will go bankrupt and fail to meet their obligations. He added: “Worrying about this real systemic risk is a key factor that motivates people to shift their interest from crypto credit to crypto options.”

Institutions interested in ETH options

As Cointelegraph previously analyzed, there is currently a slight short-term bullish sentiment in the entire market. To further understand this involvement, Cointelegraph interviewed Alex Batlin, CEO of Trustology, a cryptocurrency escrow platform. He said: “Institutional investors buy options because they think the value of the asset will rise, so they want more exposure to maximize returns,” he added, “belief is the foundation, in this case The opportunity to generate new revenue comes from the ETH2.0 mortgage and the growing DeFi market.” When launching a new platform that can trade these options, he further stated:

“New products on platforms such as OkEx and ErisX show that there are sufficient reasons to believe that the new revenue opportunities through mortgages and DeFi agreements, as well as lowering the entry threshold due to the maturity of institutional-level infrastructure, will promote the interest of institutions in ETH options. .”

“New products on platforms such as OkEx and ErisX show that there are sufficient reasons to believe that the new revenue opportunities through mortgages and DeFi agreements, as well as lowering the entry threshold due to the maturity of institutional-level infrastructure, will promote the interest of institutions in ETH options. .”

Open positions are positively correlated with price

When observing the correlation between open positions and prices over time, we note that the price increase since mid-March is closely related to the increase in open positions. Cointelegraph also reported on the possibility of Ethereum reaching $300 in the near future. This further increases the market’s bullish sentiment and will also make investors more profitable, as Sit said: “The increased interest and liquidity in the volatile market is encouraging for the development of ETH as a trading asset Step. Larger institutional participation may benefit ETH.”

The chart below shows that the ETH/USD price is positively correlated when compared with the timetable of the above open position statistics.

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By measuring the indicative analysis of Ethereum options and positive market sentiment, it is clear that before Ethereum 2.0 is launched, growth is not expected to slow down, which may bring a paradigm shift to the market itself. However, continuous technological innovation and reasonable regulations and institutional participation will be an integral part of maintaining this growth momentum.

Two sides of the same derivative: comparing the traditional market and the crypto market

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