The crypto world will have several surprises for us in 2022. From rumours of a Super Cycle to further development of the metaverse, we’re set to see huge things in all the crypto sectors, and that includes the derivatives such as futures and crypto options.
Lately, we’ve seen the emergence of new derivatives platforms such as TradeStation, Bitlevex, Quedex, amongst others. This is clear proof that there’s a higher demand for crypto options – expanding beyond BTC. Therefore, we’re going to analyze the promising future of these derivatives in 2022.
Are options the perfect solution for institutional adoption?
Even though specialists argue that we’re in the early stages of institutional adoption, it’s clear that we have a lot more institutional money flooding the market in comparison to previous years. We even have an entire country, El Salvador, buying, holding Bitcoin, and using it as a legal circulating currency. The growth is evident; however, we still have a long way to go.
The ideal way to hedge out existing risk
Nonetheless, why are crypto options the ideal vehicle to drive more institutional money into the market? Mainly due to their versatility, and based on this premise, Wall Street giants like Goldman Sachs are getting ready to offer crypto options and futures for institutions. In their case, they’re going to bet for ETH options and futures.
Essentially, institutions want crypto options as a way to hedge out existing risk, and these derivatives are the ideal way to achieve it without having to re-balance their entire portfolios. As you are not buying the cryptocurrencies themselves, you’re just buying the right to buy or sell within a specific timeline, be it 3 months, 6 months, 1 year, 5 years, etc.
Crypto options services for institutions in 2022
Therefore, we can expect more crypto options services for institutions in 2022. None can neglect the huge growth of the crypto markets, and it’s set to keep pushing forward in the coming years. Institutions don’t want to be left behind, so smart firms like Goldman Sachs have already identified a profitable niche they can attend to.
A completely new set of options
Thanks to the recent developments, institutions and clients will be able to take advantage of crypto ETF options. For example, it’s almost guaranteed that we will see the first Ethereum ETF in 2022, and that will give institutions a new way to get involved in the crypto markets. Furthermore, the SEC also approved two future-based Bitcoin ETFs recently, which will provide customers yet another way to deal with options, in order to hedge out existing risk, add exposure, plan new strategies, etc.
Further influence of crypto options on the prices of cryptocurrencies
According to experienced traders, the first Ethereum ETF will boost the price of the cryptocurrency. Some even suggest that this ETF may fuel ETH to finally overtake Bitcoin – but that’s another matter that we will discuss in a new article. However, the interest in crypto ETFs is big, especially coming from institutions.
We’ve already seen how the BTC options expiry can affect the market either positively or negatively, depending on the percentage of call and put options. With new ETF options in the market, we might see a bigger influence on the prices.
Therefore, it will be more important than ever before to check the options expiry – including ETFs – at the hour of investing, increasing your positions or trading. Since the numbers are getting bigger in the options sector, you better be ready for it.
What do the numbers look like in 2021?
Did you know that the Bitcoin open interest topped at $14B in October 2021? In October 2020 the BTC open interest “barely” hit the $2.4B mark – so we are talking about an increase of over 400% in only 1 year. This alone tells you a lot about how this crypto sector is booming.
It means that crypto options, as commented in the previous section, will have an even bigger impact on the crypto markets. With more institutions entering the market, and financial firms like Goldman Sachs ready to offer them more crypto options and futures, we can easily see bigger open interest not only in BTC but also in ETH – and that’s going to change a lot of things in the markets.
Therefore, we can expect even bigger numbers in 2022. We all know that the crypto world grows at a much higher rate than traditional markets. And given that crypto options are in their infancy compared to foreign exchange, we still have plenty of room for growth.
Conclusion
What do you think the future of crypto options will be in 2022? Do you think they will have a major influence on the market? Let us know your thoughts in the comments!
