Derivatives markets in crypto continue to grow in popularity, outpacing trading volumes in spot exchanges. This has created opportunities for traders and investors alike along with a new set of tools to assess the state of crypto markets. In this webinar we will dive into the numbers behind derivatives markets in crypto both in centralized and decentralized venues. Similarly, we will uncover opportunities in each of these markets that can benefit traders and builders alike.

1. Analyzing Growth & Opportunities in
Crypto Derivatives
January 2022

2. Agenda
● Intro & Growth
● Key Derivatives Indicators
● Opportunities & the Road Ahead

3. A quick update about ITB

4. Partnerships
● Domain Money, WazirX, Let’s Bit

5. Upcoming Ownership Release
● 5 new indicators giving deeper
insights into buying/selling from
holding groups
● Holders with 1, 10, 100 BTC, etc
● Several requests
● Newsletter data

6. Intro & Growth
of Derivatives

7. Intro to Derivatives
● Trading contracts based on financial instruments
○ Asset (e.g. AAPL, BTC)
○ Index (e.g. SPY futures)
○ Interest rates (e.g. Treasury yield futures)
● Common types of derivatives
○ Futures - agreement to buy/sell
○ Options - right to buy/sell
○ Swaps - exchange of instruments
“Derivatives are
financial weapons of
mass destruction.” -
Warren Buffett

8. Use-Cases for Derivatives
● Use-cases
○ Leveraged exposure to an asset
○ Hedge against risk of underlying asset
○ Price discovery (high liquidity)
○ Arbitrage
● Highly risky

9. Crypto Derivatives
● Perpetual swaps
● Adapted to crypto’s nature
○ 24/7 - no expiration, non-stop trading
○ Higher leverage

10. TradFi, CeFi & TradFi Derivatives
Attribute TradFi (CME) CeFi (Binance) DeFi (dYdX)
Daily Volume (BTC) $1B - $2B $15B - $30B $2B - $4B
Max Leverage 2x 20x+ 20x+
Min Order Size 0.1 BTC 0.001 BTC 0.001 BTC
Denominator USD USDT, BTC USDC, USDT
Composable No No Yes

11. Timeline for Crypto Derivatives
● 2014 - BitMex launches
● 2017 - CME and CBOE launch
● 2019 - Bitfinex, Binance, Kraken,
FTX launch perpetual swaps
● Quickly surpass spot

12. Data Source: IntoTheBlock
Growth of Crypto Derivatives
● $100B/month by late 2019 ● $25.6T in 2021 ● ~ 5x YoY

13. Key Derivatives Indicators

14. Deriving Value
● Derivatives data has become a must
● Market momentum
● Tops and bottoms
● Regardless of using derivatives or not

15. Volume & Open Interest (OI)
● Volume - Total amount of contracts (or $) traded
● Open Interest - Amount of outstanding positions (both long and short)

16. Open Interest
● Similar growth to vol (5x)
Data Source: IntoTheBlock
● Higher high in November

17. Open Interest to Market Cap
● Growth irrespective of price
Data Source: IntoTheBlock
● Insights on momentum

18. Turnover Ratio
● Vol / OI
Data Source: IntoTheBlock
● Signs of short-term speculation

19. Funding Rate
● Charged to stabilize contract peg
Data Source: IntoTheBlock
● Spotting potential tops and bottoms

20. Contango/Backwardation
● Difference between futures and spot
Data Source: IntoTheBlock
● Sentiment and expectations

21. Opportunities &
The Road Ahead

22. Market Neutral Strategies
● Generating yield without price exposure
● Carry trade: Long spot, short futures
● Profiting from diverging funding rates
● Arbitrage in prices

23. Directional Strategies
● Long/short perps or options
● Sell options (covered call, put selling)
● Structured products

24. Structured Product Vaults
● Automated options selling
○ Cheaper
○ Auto-compounds
○ Sustainable yield, but risky
● Ribbon Finance, Dopex, Thetanuts

25. Structured Product Vaults
● Covered calls - Own spot, sell out of the money futures

26. Status DeFi Derivatives
● Transparent look into one of most opaque industries
● Gaining traction - dYdX volume up 100x since L2 launch
● Growing number of protocols across chains
● Experimentation and user ownership

27. Road Ahead
● Derivatives = trading contracts
● Smart contracts unlock utility from these
● Similar path to DEXs
● Leveraging composability
● ERC-4626

28. Conclusions
● Derivatives are a key component of financial markets
● Crypto derivatives have grown but still have room for more
● DeFi derivatives still in their infancy
● Expect innovation and growing market share

30. Thank You! Questions?
Lucas Outumuro
Head of Research at IntoTheBlock
Email: loutumuro@intotheblock.io
Twitter: @LucasOutumuro