According to the definition, the derivatives considered to be treated differently from the underlying asset, but necessarily link to the underlying asset, the legal status of the underlying asset never interface the derivative form, neither parent-child relations ship exists among the two forms nor the principal and accessory relationship, the importance of the contract between two forms held with the forward commitment of the underlying asset.
Cryptocurrency derivatives are basically the type of contract agreements between stakeholder on the future price of the underlying crypto assets, same as traditional derivates these crypto derivates are the speculation on the prices of the crypto assets at a specific date in the future, the prices of these derivatives greatly influence the entire cryptocurrency markets and provide the mechanism to hedge against the fluctuated crypto market but only within a certain range, in case of the higher volatility the derivatives face strong liquidations and will add more volatility in the cryptocurrency market.
The Defi revolution also triggers the support for crypto derivatives and attracted institutional investors, the mainstream adoption of the crypto assets fuel the wider range of derivatives products across the crypto world. The current yearly growth of crypto derivates is about 3,900% (CoinGecko).
But the problem in these derivatives is the high volatility of the cryptocurrency market, how an investor save himself against the sudden and big plunge, investors face substantial losses due to higher market fluctuation, however, these derivatives are the perfect fit in the risk of volatility, therefore these derivates become the hot product for cryptocurrency volatile market.
These derivatives allow investors to take enormous advantages of the future prices of crypto assets, the growth of crypto derivatives puts more liquidity to the entire world of decentralized exchanges and becomes the major factor for mainstream adoption of encrypted assets.
Goldman Sachs also utilize the potential of Bitcoin and recently opened the NDF trading (non-principal delivery forward trading) which is the kind of derivative product that is linked to Bitcoin, the important point here, if such institution and investors are moving to show interest, means that they are bound to be profitable.
Although cryptocurrency derivatives are unmatured and still in infancy but the offering of many different forms of crypto derivatives and the appearance of the various crypto exchanges is the indication of wider acceptance of these products and exchanges, these type of support not only mitigate the risks in the crypto world but also increase liquidity for the entire Defi ecosystem.
There are some countries in our smart world, which are completely cashless, and every transaction in those countries are based on only digital tools and services, with the help of AI and machine learning and the deep insights of the transactional data, analysts will determine the leverage, mortgage, and most basic things in the fintech world moreover the designing of a complex form of derivative become so easy with such data.
https://www.coindesk.com/binances-crypto-derivatives-platform-sees-record-open-interest-of-10b
https://www.researchgate.net/publication/337725032_Cryptocurrency_Derivatives_The_Case_of_Bitcoin
https://www.researchgate.net/publication/337725032_Cryptocurrency_Derivatives_The_Case_of_Bitcoin
Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://medium.com/cryptocurrencies-ups-and-down/cryptocurrency-derivatives-1bf321a092d5?source=rss——-8—————–cryptocurrency
