Billion dollar bitcoin funds are reshaping the crypto derivatives market
August 4, 2021, 9:06AM EDT · 2 min read
Episode 45 of Season 3 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Genesis Global Trading’s Head of Derivatives Joshua Lim.
Eventus is the leading global provider of multi-asset class trade surveillance, transaction monitoring and market risk solutions. Eventus offers a powerful, award-winning trade surveillance platform that is easy to deploy, customize and operate. Eventus is proven in the most complex, high-volume and real-time environments and supports many of the industry’s leading crypto exchanges including Coinbase, Gemini, ErisX and OSL. The company’s rapidly growing client base relies on Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges.
Whether you’re an experienced crypto trader or just starting out, Kraken has the tools to help you achieve financial freedom. With 50+ cryptocurrencies to choose from, industry-leading security and a wide variety of features to suit any investing strategy, Kraken puts the power in your hands to buy, sell and trade digital assets. Visit Kraken.com to get started today.
Genesis Global Trading—the New York-based crypto firm that bills itself as a prime brokerage—turned over more than $8 billion worth of derivatives last quarter.
Joshua Lim is the man behind those billions as the firm's Head of Derivatives. Lim joined The Scoop this week to unpack Genesis' second quarter report, explaining how new preferences among investors and traders have shaped the make up of derivatives. He told The Block's Frank Chaparro that the growth of crypto-native hedge funds have increased their need for derivatives, including options and futures, to hedge their positions.
"I think it's mostly crypto negative hedge funds that we deal with that were more willing to engage with us on hedging strategies," he said. As bitcoin was approaching $55,000, he said many were "looking for attractive pricing on the implied volatility across two different strikes such that they could buy some cheap sort of protection for their portfolio."
That desire to hedge among crypto players was echoed in Genesis' report, which was released Wednesday:
"As BTC/USD marched to new highs in April, a number of our forward-thinking crypto-native hedge fund and corporate treasury counterparties meaningfully stepped up their systematic put-hedging programs."
As for the second-quarter specifically, Lim pointed out a number of trends that played out, including the tightening of the spread between spot and futures and a reversal of the popular basis trade that aims to profit from that spread.
In this episode Lim also unpacks:
- How the derivatives market in crypto evolved from linear products to a wide-range of products
- How the spread between spot and futures can indicate how frothy the market is
- The big takeaways from Genesis' second quarter report
- What needs to happen in the NFT market for it to support derivatives
- The emergence of market neutral strategies in crypto
© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.