Futures: The Future of the Crypto Space, and a New Battlefield for Crypto Exchanges
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Over the past few years, the crypto market has continued to expand, and the total market cap of cryptocurrencies peaked at nearly USD 3 trillion last year. Thanks to their rising potential and outstanding performance, more users worldwide are starting to adopt and invest in this kind of leading emerging assets. As the number of crypto investors goes up, the market has expanded and matured. Meanwhile, derivatives, which are an essential component of conventional financial markets, are playing unique roles in the crypto space.
The introduction of conventional derivatives provides investors with more tools to avoid risks, hedge against depreciation risks, and built reasonable portfolios. As the crypto market expands in terms of both breadth and depth, the futures market often trumps the spot market when it comes to leading price discoveries. A big financial market facilitates the development of derivatives, and derivatives will in turn help the financial market become fully-fledged.
Perpetual futures contracts are the most widely used crypto derivatives. In 2018, BitMEX introduced perpetual futures contracts, making it the first crypto exchange to ever launch such derivatives. Later on, many more exchanges also released crypto futures, covering contracts margined by mainstream cryptos and USDT. Meanwhile, the trading volume of perpetual futures contracts has continued to grow.
According to a report by TokenInsight, the total spot trading volume recorded by centralized exchanges and decentralized exchanges in 2021 reached USD 49 trillion, while the total trading volume of perpetual futures contracts hit USD 56.8 trillion, a
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