The crypto derivatives market is among the fastest-growing blockchain-backed financial products, primarily through the continuous evolution of on-chain synthetic assets.
Within the traditional financial (TradFi) ecosystem, derivatives trading is a product where the derivative’s value is “derived” from the price or value of an underlying asset.
Compared to TradFi, decentralized finance (DeFi) is relatively new, with most investors primarily engaging in spot trading. However, as institutional and retail investors continue entering the cryptoverse, several promising cryptocurrency derivatives have been developed to provide traders with access to a broader spectrum of yield-generating investment strategies.
A Brief Look At Crypto Derivatives Of Today’s Market
The first crypto derivatives emerged as early as 2011 but were limited to futures contracts based on the price of legacy cryptocurrency bitcoin (BTC). Years later, new exchanges started offering a broader selection of derivatives that allowed investors to bid against expected market movements.
By 2020, the crypto derivatives scene exploded, establishing new records. In fact, in May 2020, the crypto derivatives market had a 24-hour trading volume of $320 billion, almost 60% higher than the trading volume in crypto spot markets which was roughly around $200 billion, indicating that crypto derivatives trading will continue dominating the crypto trading scene.
To date, the crypto market is mainly limited to blockchain-backed derivatives. But new platforms like SynFutures have developed on-chain synthetic assets and other similar tools that can seamlessly mirror the performance of off-chain (real-world) assets, thus expanding the scope of crypto derivatives.
Most Popular Crypto Derivatives Trading Options
Depending on the underlying contract, most present-day platforms offer one or more of the following types of derivatives trading options:
- Futures Trading – This “legal” agreement represents a contract between two parties to buy or sell an underlying asset at a predetermined price in the future. Most regulated exchanges offer their users the opportunity to engage in futures trading.
- Options Trading – Unlike futures trading, options trading allows traders the right to buy or sell an underlying asset at a pre-defined future price and date. However, they aren’t obligated to sell or buy the same.
- Perpetual Contracts – Contrary to both futures and options, perpetual contracts don’t come with settlement or expiration dates, allowing traders to keep their positions open for an indefinite period.
- Swap Trading – Swap trading relies on a “contract” between two parties to exchange cash flows at a future date based on a predetermined formula. Almost all swap trading is handled via OTC contracts and isn’t directly offered by exchanges.
The Future Of Derivatives Trading
Even though the rapid development of crypto-backed derivatives underlines the cryptoverse’s gradual maturation, most crypto derivatives follow a preset pattern and offer limited options, predominantly linked to BTC and a couple of other altcoins.
This is where SynFutures comes into the picture, opening the scope of derivatives trading to a broader spectrum of opportunities for retail and institutional investors. Leveraging a decentralized derivatives protocol, SynFutures enables anyone to trade anything at any time, laying the groundwork for the next wave of derivatives investing.
Dubbed the “next-gen decentralized derivatives platform,” SynFutures, currently in the beta testing phase, has already made a name for itself. Led by professionals with rich experience in both DeFi and TradFi sectors, the platform is backed by prominent investors like Polychain Capital, Pantera Capital, Bybit, CMS Holdings, Kronos, ISOG Ventures, and Dragonfly Capital, among several others.
As an open and fully decentralized derivatives platform, SynFutures powers trading across many synthesized assets, including Ethereum-native, cross-chain, and off-chain real-world assets. Moreover, SynFutures is also the first derivatives trading platform to offer user-generated markets, allowing anyone to list any trading pair within 30 seconds while empowering liquidity providers to set futures contracts on arbitrary assets and expiration dates.
SynFutures aims to gradually roll out its proprietary Synthetic Automated Market Maker (sAMM), allowing users to trade and list all crypto majors, altcoins, indices, NFTs, and real-world assets with one single token. Furthermore, the platform will also add an Automated Liquidator (ALQ) to reduce the entry barrier of liquidators while automating the liquidation process.