Friday, August 23, 2019

Launch new solution for block trading of cryptocurrency derivatives

A joint initiative between a cryptoactive platform and a courier service introduces cryptocurrency derivatives block trading services, seeking to bring that market closer to the main trends that follow in the sector.

Deribit, a platform for the exchange of futures and options of bitcoin and ethers, is partnering with Paradigm, a messaging service for institutional traders, in order to create what they define as the first such offer in the cryptocurrency sector . Contracts can be concluded bilaterally and then liquidated and compensated in Deribit, which has insurance designed to cover the losses of bankrupt merchants.

Deribit established as a minimum size of its operations the amount of 40 bitcoins and 800 ethers (approximately USD 400,000 and USD 150,000, respectively), for option contracts linked to those cryptocurrencies, according to the executive director, John Jansen. Ten of the largest cryptocurrency trading companies subscribed to the service, although Paradigm founder Anand Gomes only named one: QCP Capital.

While Deribit, which was founded in 2016, is based in Amsterdam, it is not regulated by the Dutch authorities because their contracts are paid in cryptocurrencies. In that sense, the law of that country defines a derivative as a contract liquidated in cash, said Marius Jansen, director of operations of the company and brother of the CEO.

Block operations prevail in the largest options markets, where companies and institutional traders seek to execute large volume transactions, at a single agreed price and outside the public eye. The initiative is part of a broader effort to create a professional market for cryptocurrency derivatives.

The company also bets that, as in other sectors, cryptocurrency derivatives will eventually exceed the size of the underlying market. While the average daily volumes in bitcoin options went from USD 10 million in February, to USD 40 million in July, they remain a fraction of the approximately USD 3 billion in BTC that change hands daily, according to the data company on Skew cryptocurrency derivatives.