Crypto Fund QCP Capital Says Options Trading Is Next Institutional Growth Driver

SEOUL, South Korea — Options trading is likely to be a key bet among institutional investors in cryptocurrencies than other niches such as decentralized finance (DeFi) or non-fungible token finance (NFTfi) in the coming years, according to prominent crypto fund QCP Capital.

“DeFi has been big, GameFi has been big and options have always taken a backseat,” Darius Sit, QCP Capital co-founder, said at a Korean Blockchain Week panel here attended by CoinDesk. “But this year, and going forward, is going to be more interesting because the space is getting more institutional.”

Options are popular among professional traders because they give the buyer the right – but not the obligation – to buy or sell the underlying asset at a specific price on or before a certain date. These products can be used to lay speculative bets and hedge risk.

Sit argued that institutions were likely to adopt a financial instrument, such as an option, that was much more conversant compared with niche on-chain tools or non-fungible token (NFT)-based financial platforms.

“The first stop for them is usually [options] because for them it's is the same product, same instrument, same market structure, just different underlying. And so options and futures become a very big first of all for them,” Sit said.

The ex-BNP Paribas trader said “big name” banks are coming in and starting to “dominate" options flow: “These guys used to do billions or trillions in forex. Now they're doing it in crypto,” he said.

As for the preferred venue to trade such products, Sit said institutions were likely to use centralized exchanges over their decentralized counterparts for the former’s ease of onboarding, settlements and overall distribution channels.

QCP Capital is a major player in the crypto options market, doing billions of dollars in trading volumes monthly. That’s a significant chunk of total crypto options volumes, with some $12 billion worth of options traded in July alone, data shows.

While bitcoin (BTC) options have historically dominated the market, ether (ETH) options recently flipped the former for the first time ahead of September’s expected Merge event as investors turned bullish on ether’s long-term prospects, as previously reported.