Ben Strack

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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As you’ve probably heard a thousand times: Tokenization is in its early stages.&nbsp;



But a new tidbit seems to confirm that the utility of onchain assets will continue to evolve.&nbsp;



As it stands now, stablecoins are “really the only [RWA]” that have gained substantial product-market fit, Ondo Finance CEO Nathan Allman recently told me. (My fuller Q&amp;A with Allman will hit<a href="http://blockworks.co/"> Blockworks.co</a> a bit later).&nbsp;



<a href="https://blockworks.co/news/circle-shares-nyse-day-one">Circle had its IPO</a> earlier this month and the Senate<a href="https://blockworks.co/news/genius-stablecoin-act-passes-senate-vote"> passed the GENIUS Act</a> last night, both of which brought stablecoins further into the public eye.



While the promise of more widespread access to<a href="https://blockworks.co/news/tokenized-rwa-segments-will-boom-next"> tokenized stocks, bonds</a> and other assets has not yet been fully realized, another tokenized RWA with growing traction is money market funds.&nbsp;



BlackRock got into that game with Securitize via the USD Institutional Digital Liquidity Fund (BUIDL) launch in March 2024. Its assets under management stand at roughly $2.9 billion.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1213" height="492" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=1024&amp;h=1024" alt="" class="wp-image-104119" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=1213 1213w, https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/06/image-3.png?w=80 80w" sizes="auto, (max-width: 1213px) 100vw, 1213px" /></figure>



Now, certain institutional clients using Crypto.com and Deribit can post BUIDL as collateral. The thought is enabling capital allocation flexibility while getting the relative price stability of tokenized Treasurys.



And the yield.



As Securitize CEO Carlos Domingo put it in a statement: “The fund is evolving from a yield-bearing token into a core component of crypto market infrastructure.&#8221;



Tokenized money market funds are not here to replace the ~$240 billion stablecoin market, industry watchers have noted.



Standard Chartered’s Waqar Chaudry<a href="https://blockworks.co/news/tokenized-yield-funds-complement-stablecoins"> told me in March</a> that the two are “definitely complementary,” adding: “Many might prefer tokenized funds for collateral management.”



But while BlackRock’s Robbie Mitchnick sees tokenized yield funds as the predominant cash savings vehicle, he believes stablecoins “will retain their dominance” for payments and transactions. Deribit’s nearly $1.2 trillion in trading volume was one reason<a href="https://blockworks.co/news/coinbase-deribit-deal-focus-derivatives"> </a>Coinbase <a href="https://blockworks.co/news/coinbase-deribit-deal-focus-derivatives">agreed to buy</a> the company last month. 



We’ll see if and how today’s development contributes to accelerated tokenized yield fund adoption. And, of course, we’ll get back to you.



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BlackRock

BUIDL as collateral? Another step in the tokenization story

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Coinbase had an eventful Thursday — revealing its intent to buy crypto options giant Deribit before detailing its Q1 earnings after the market closed.&nbsp;



As the dust settled, analysts gave a mixed bag of outlooks for the company.



The crypto exchange’s total first quarter revenue was $2 billion — down 10% from the prior quarter. While trading revenue was down 19% quarter over quarter (nearly $1.3 billion), subscription and services revenue rose 9% over that span (to ~$700 million).&nbsp;



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That subscription and services figure includes stablecoin revenue derived from its arrangement with Circle (Coinbase earns reserve income on the USDC it holds).



USDC’s market cap reached a high around $60 billion in Q1, and average USDC held in Coinbase products grew 49% QoQ to $12.3 billion.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe_uGo6Rna-Ei0fZiS3_Pzr6xJKiTYV1qOSIvT3Qk-sAoq_ZN9QSxeCTyJphkmlMSzRysG0CBS_qwGYTqftD7OPPoFmZaZ5vgxcqsKgLW67EDYuUFAGKfZer0iJ8Pw41-Toi7mqfg?key=x_C1LikFatz1Sl7HKZBR9ObY" alt=""/></figure>



Speaking of stablecoins, the Senate’s cloture vote yesterday on the GENIUS Act failed, 48-49. Coinbase CEO Brian Armstrong said he wasn’t discouraged.



“It’s all part of the negotiation,” he noted on yesterday’s earnings call. “We think there’ll be another vote next week on stablecoins so we’re very excited about that progress.”



<h2 class="wp-block-heading">Deribit deal, more M&amp;A?</h2>



Analysts of course asked about the pending $2.9 billion deal to acquire Deribit revealed earlier in the day.



Benchmark analyst Mark Palmer <a href="https://blockworks.co/news/coinbase-deribit-deal-focus-derivatives/">said yesterday</a> that the purchase would give Coinbase “an immediate and dominant foothold in the high-growth derivatives space” as more institutions adopt crypto. Architect Partners’ Michael Klena told me he expects competitors to respond via their own acquisitions.&nbsp;&nbsp;&nbsp;&nbsp;



In terms of financial impact, Coinbase CFO Alesia Haas said: “Deribit has a history of positive adjusted EBITDA, and we believe it will be adjusted EBITDA positive on an accretion basis.”



Oppenheimer &amp; Co. analyst Owen Lau said he believes this deal will make COIN a “legitimate challenger” to Binance, Bybit and OKX when it comes to derivatives.&nbsp;



“Importantly, crypto options are less cyclical, with steady demand during both up and down markets,” Lau explained.



But Compass Point analysts Ed Engel and Joe Flynn pointed out Deribit’s focus on institutional customers. That doesn’t help Coinbase grow its retail-driven perpetuals trading volumes, which they called “a necessary precursor to growing market share.”



When asked about whether the crypto exchange would remain active on the M&amp;A front, Coinbase president Emilie Choi noted the cash on its balance sheet ($8.5 billion, by Lau’s count) means it can make “bigger bets.”



Choi added: “We also think <a href="https://blockworks.co/news/sec-crypto-round-table-execs">regulatory clarity</a> is going to enable us to take larger swings with greater confidence, unlocking new products, utility cases and geographies.”



<h2 class="wp-block-heading">Mixed outlook</h2>



Despite general optimism around the Coinbase-Deribit deal, Morningstar analyst Michael Miller told me he doesn’t think the acquisition drastically changes his overall view of, or outlook for, the exchange (his fair value estimate for COIN is $170).



After all, he said, it’s an extension of existing efforts and doesn’t reduce Coinbase’s crypto market exposure, which contributes volatility to quarterly results.



Though Coinbase has had “considerable success” in growing stablecoin revenue, Miller noted, execs expect that to be more than offset in Q2 by a decline in blockchain rewards revenue. The company projects its Q2 subscription and services revenue to fall to somewhere between $600 million and $680 million.&nbsp;



Coinbase’s $240 million of total transaction revenue in April puts it on pace to end Q2 at $720 million. That would be down 34% from Q1.&nbsp;



Engel and Flynn downgraded COIN to a sell rating last week — reiterating in a note yesterday that COIN&#8217;s addressable market for retail trading is already deeply penetrated in the US.



“We believe institutional segments represent a larger growth opportunity; however, these are both lower margin and more competitive businesses than COIN&#8217;s legacy retail footprint,” they explained.



The Compass Point analysts’ stock price target for COIN is $180. The company’s shares were trading for ~$202 at 2 p.m. ET — down 2% on the day.&nbsp;&nbsp;



Lau is more bullish, giving COIN a 12- to 18-month price target of $269. He lowered that from $279, though, noting tariff-fueled macro uncertainty’s effect on volumes.



We’ll see how legislative updates and trade war developments impact COIN going forward.



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Coinbase

Analysts update COIN outlooks after Q1 results, Deribit deal

Coinbase’s <a href="https://blockworks.co/news/coinbase-to-acquire-deribit-in-2-9b-deal">agreement to acquire</a> crypto options giant Deribit affirms the trend of industry players flocking to a fast-growing derivatives market.&nbsp;&nbsp;



Industry observers expect more deals to come in this sub-sector, as the changing regulatory landscape empowers crypto giants to capitalize on heightened institutional demand.



The crypto exchange is set to pay roughly $2.9 billion for the Panama City-based company — $700 million in cash and 11 million shares of COIN stock.



Coinbase said in a blog post that Deribit’s options platform complements its US futures and international perpetual futures businesses — “completing our derivatives offering.”



The company added: “This is an important step toward our goal of providing traders access to spot, futures, perpetual futures, and options trading — all in one seamless, capital-efficient platform.”



This deal — subject to regulatory approvals — “would give the company an immediate and dominant foothold in the high-growth derivatives space ahead of an anticipated increase in institutional adoption of digital assets,” Benchmark analyst Mark Palmer wrote in a Thursday research note.



After all, he noted, Deribit is the world’s largest platform for bitcoin and ether options. Its nearly $1.2 trillion in trading volume in 2024 was almost double that of the prior year.&nbsp;



“The firm’s sophisticated trading tools, which cater to institutional and high-frequency traders, could strengthen Coinbase’s Prime platform and institutional appeal,” Palmer explained.&nbsp;



This pending deal follows Coinbase’s 2022 acquisition of FairX, which was later rebranded to Coinbase Derivatives Exchange. That gave the company a CFTC-regulated platform for offering crypto derivatives in the US.&nbsp;



Coinbase is now going a step further by expanding its international footprint, Morningstar analyst Michael Miller said.&nbsp;&nbsp;



“This is also a sign that the new regulatory environment is giving them more confidence to be aggressive in their growth efforts,” Miller told me.



The crypto industry saw <a href="https://blockworks.co/news/crypto-ma-mergers-feeding-frenzy-kraken">a record number of M&amp;A deals</a> during the first three months of 2025. There were 62 such crypto transactions in Q1, according to advisory firm Architect Partners — up from 59 deals in the final quarter of 2024.&nbsp;



This deal would surpass — in size — two others revealed earlier this year. Kraken shared in March that it was set to purchase NinjaTrader for $1.5 billion. A few weeks later, <a href="https://blockworks.co/news/crypto-tradfi-intersections-ripple-blackrock">Ripple said it agreed to buy Hidden Road</a> — a prime broker clearing $3 trillion annually — for $1.25 billion.&nbsp;



Before those, digital asset prime broker FalconX bought trading firm Arbelos Markets in January as part of a push to become one of the largest crypto derivatives dealers.



“It follows our thesis that derivatives M&amp;A will continue to be active,” Architect Partners’ Michael Klena told me. “But the difference in this deal is scale, as Coinbase acquired one of the largest in a headline deal.”



Because derivatives are a higher-margin product than spot trading, firms will look to expand those types of offerings as trading fees are compressed, he added.



Regulatory changes and optimism around upcoming crypto-friendly frameworks has also spurred institutional demand — further fueling these kinds of moves. Coinbase’s institutional trading volume in 2024 amounted to $941 billion, which was up 139% year over year.



“Since Coinbase is taking captive one of the largest derivatives firms, their competitors will be looking to enhance product via acquisitions,” Klena said. “So overall it&#8217;s a deal that makes sense in the market, and we expect more to come around derivatives trading and infrastructure.”



Coinbase’s stock price was roughly $205 at 11 a.m. ET, marking a 4.3% increase on the day.&nbsp;



The company is hosting a Q1 earnings call at 5:30 p.m. ET. Following the deal announcement, Palmer noted: “Our estimates for the company are under review.”



<a href="https://blockworks.co/newsletter/forwardguidance">Subscribe</a> to the Forward Guidance newsletter for more on Coinbase’s Q1 results.  



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Coinbase-Deribit deal affirms industry’s growing focus on derivatives

Katherine Ross

Coinbase has agreed to snap up Deribit in a $2.9 billion deal, executives from both companies told The Wall Street Journal.&nbsp;



The deal is the single largest acquisition in crypto’s history, easily beating Kraken’s $1.5 billion deal for NinjaTrader earlier this year. Stripe said it planned to acquire Bridge in a $1.1 billion deal, and Ripple announced it would acquire Hidden Road for $1.25 billion.&nbsp;



The makeup of the deal is $700 million in cash and 11 million shares of its Class A common stock.&nbsp;



In a blog post, Coinbase said that it expects the deal to close by the end of this year.



By acquiring Deribit, which had been shopping itself around for a few months, Coinbase will now expand into crypto derivatives. Deribit has seen an <a href="https://insights.deribit.com/exchange-updates/deribit-reports-q4-and-2024-year-end-volumes-provides-operational-update/">uptick</a> in overall trading volume activity thanks to a softening regulatory environment and expanding interest from institutional investors looking to capitalize on crypto.&nbsp;



“With Deribit’s strong presence and professional client base, Coinbase is making its most substantial move yet to accelerate our international growth strategy,” Coinbase said. It plans to create the most “comprehensive institutional derivatives platform.”



“We’re excited to join forces with Coinbase to power a new era in global crypto derivatives,” Deribit CEO Luuk Strijers said in a statement emailed to Blockworks.



“As the leading crypto options platform, we’ve built a strong, profitable business, and this acquisition will accelerate the foundation we laid while providing traders with even more opportunities across spot, futures, perpetuals, and options – all under one trusted brand. Together with Coinbase, we’re set to shape the future of the global crypto derivatives market.&#8221;



Prior to striking the deal with Coinbase, Kraken also expressed <a href="https://www.coindesk.com/business/2025/02/20/crypto-exchange-deribit-still-in-talks-to-be-acquired-by-kraken-source">interest</a> in the options exchange.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcEpvO2GFVKQmVXCxIrDu4X8iCBJdZdpf-Qi8e-ocH8XGrnU_sQYBNqGb0LPJXmeeKt2LXgOyuBm9MUO3wtC1G_YXf663Ow-mbs6271AVnSBQ70xOgA1_RXGO76uhVl0pFpeh3BHQ?key=mnhKqsV8m8wnndNQJnLvBg" alt=""/></figure>



Overall crypto M&amp;A has seen an uptick last quarter, per data from Blockworks Research. Crypto firms specializing in finance have seen the largest amount of M&amp;A activity.&nbsp;







Updated May 8, 2025 at 9:30 am ET: Added additional context throughout.



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Coinbase to acquire Deribit in $2.9B deal

Crypto infrastructure firm Fireblocks is the latest company aiming to ease institutional investors’ counterparty risk concerns following the collapse of centralized crypto giants like FTX.&nbsp;



Via a new product called Off Exchange, Fireblocks will let users lock funds in what it calls Collateral Vault Accounts (CVA), the company said Tuesday.&nbsp;



These accounts are on-chain multiparty computation (MPC) wallets that “programmatically lock and mirror assets” to the connected exchange, according to Stephen Richardson, Fireblocks’ managing director of financial markets.



Once traders transfer assets to a CVA, a credit is issued to the exchange. Crypto derivatives exchange Deribit is the first to integrate with the new offering.



Read more: <a href="https://blockworks.co/news/ftx-meltdown-timeline">FTX began to unravel one year ago today: A timeline</a>



&nbsp;The credit can then be used for spot, margin or derivatives trading activities, and settlement occurs in real-time and on-chain. Once the CVA is rebalanced, traders can withdraw their assets to another venue, counterparty or internal wallet.



“Because the MPC wallets are on-chain, exchanges have complete transparency to monitor and validate client collateral and enforce risk management without taking custody,” he told Blockworks. “This approach protects traders’ principals by enabling them to retain shared custody of their assets in a segregated MPC wallet, and mitigates risk of exposure of funds being commingled in a custodial account or misappropriated by an exchange.”



Some providers use custodial solutions that pool traders’ assets in a commingled account, Richardson noted. In those cases, he said, settlement occurs off-chain via a sub ledger, and exchanges are sometimes required to lock funds in a third-party cold storage solution.



Luuk Strijers, chief commercial officer of Deribit, said in a statement that <a href="https://blockworks.co/tag/fireblocks">Fireblocks’</a> approach is used “to reduce client capital deposited at exchanges while providing our business with greater liquidity and transparency.”&nbsp;&nbsp;



Fireblocks is not the only crypto player who has sought to mitigate counterparty risk after <a href="https://blockworks.co/tag/ftx">FTX</a> imploded last November. FTX founder Sam Bankman-Fried was <a href="https://blockworks.co/news/sam-bankman-fried-found-guilty">found guilty earlier this month</a> on charges including wire fraud, as well as conspiracy to commit fraud and conspiracy to commit money laundering.&nbsp;&nbsp;



More recently, the US Securities and Exchange Commission <a href="https://blockworks.co/news/kraken-commingle-customer-funds">alleged in a lawsuit that Kraken commingled customer crypto assets</a> with its own. The exchange said at the time: “We disagree with the SEC’s complaint against Kraken.”



Bitcoin asset management platform Onramp last month <a href="https://blockworks.co/news/bitgo-crypto-custody-investors">launched a multi-institution custody product</a> that divides key-holding responsibilities to three institutions. Two of the three keys are needed to move the funds at the direction of the end client.



Custodia Bank earlier this month <a href="https://blockworks.co/news/custodia-banking-bitcoin-custody">debuted a custody model</a> in which a customer delegates crypto storage to a custodian that stores the assets on-chain.



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Custody

Fireblocks debuts latest tool to combat crypto counterparty risk

Sebastian Sinclair

Options contracts for the quarter on the leading global crypto derivatives exchange are due to expire at month&#8217;s end, a timeframe that has traditionally seen heightened market volatility.



The week ahead marks the month-end and quarter-end expiry date for bitcoin (BTC) and ether (ETH) options contracts for Deribit, with nearly $5 billion notional expiring on Sept. 29.



Luuk Strijers, Chief Commercial Officer at Deribit, told Blockworks the figures this September are consistent with this year’s trend when compared to the previous June&#8217;s $5.4 billion and March&#8217;s $5.2 billion expiries.



The current quarter&#8217;s expiries account for 35% of the platform&#8217;s open interest, involving 113,000 BTC and 1.1 million ETH options contracts, <a href="https://metrics.deribit.com/options/BTC">Deribit data</a> shows.



“Quarterly expiries are typically the most significant, in terms of volume and value,” Strijers said. “In the past month, we have seen stable markets while the Gamma of the September expiries has increased gradually as a function of time.”



In simple terms, Gamma measures how sensitive an option&#8217;s price is to a change in the price of the underlying asset, in this case, BTC and ETH. A rising Gamma means that, as the asset&#8217;s price changes, the option&#8217;s price will change quickly.



In spot markets, a rising Gamma in options can have a ripple effect. When Gamma increases for options, market participants holding those options may have to adjust their positions more frequently to hedge their risks.&nbsp;



Adjustments often involve buying or selling the underlying in the spot market. If Gamma is rising and the price of BTC increases, an option holder might need to buy more BTC in the spot market to remain hedged. Conversely, if BTC&#8217;s price falls, they might need to sell BTC.&nbsp;



The effect of an options expiry depends on the open interest for particular strike prices and how they relate to the current market price, Strijers said.&nbsp;



If a position has a strike price significantly different from the current price, it will likely expire worthless, lessening its impact on trading.&nbsp;



On the other hand, if the strike price is close to the current market price, it could attract more trading activity, potentially leading to increased price fluctuations and volatility, the Deribit executive added.



“The impact of an uneven distribution of Gamma amongst traders would have [previously] resulted in much more volatility as compared to what we have seen these days,” Strijers said. “Therefore we don&#8217;t anticipate strong market moves in the coming week.”&nbsp;



The consensus around September’s expiry is forecasted to have little effect on digital asset spot prices, according to other analysts Blockworks spoke with.



Le Shi, head of trading at Auros said lower volatility in crypto is affecting institutional interest, implying a stable crypto market is likely, especially when juxtaposed with other financial markets that offer higher returns.



“Lower implied volatilities are reflective of the market consensus that not much is expected to happen in the near term,” Shi said.



Markus Thielen, Head of Research and Strategy at Matrixport agreed, adding there existed waning interest in options trading, specifically the decline in premium prices for option sellers.



“While volatility tended to trade at a hefty premium, the decline in premium is now synonymous with picking up pennies in front of a steamroller, Thielen said. “The potential approval of a US-listed bitcoin ETF has added event risk to the mix that is tough to manage for option sellers.”



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Bitcoin

Deribit quarterly bitcoin options to expire, but volatility impact should be minor

Casey Wagner

With dropping volatility and looming end-of-quarter options contracts expirations, crypto markets are poised for an interesting week. Analysts say the recent rally has investors rethinking their positions.&nbsp;



Exchange Deribit has around 150,000 bitcoin options contracts worth about $4.5 billion set to expire on Friday. The exchange also has about $2.3 billion worth of ether (<a href="https://blockworks.co/price/eth">ETH</a>) options contracts expiring on the same date. Bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether were trading at $30,701 and $1,896, respectively, at time of publication.&nbsp;



“BTC Max Pain at a significantly reduced level of $26,000 might alleviate the prevailing downward pressure on prices following the expiration,” Shaun Fernando, chief risk officer at Deribit, said. “With an impressive open interest of over $350 million at the $30,000 strike, the approaching quarterly expiration promises an exhilarating conclusion, carrying the potential for price turbulence amidst diverse gamma hedging strategies.”



Analysts agree, open interest is a key area to watch.&nbsp;



“Cryptocurrency derivatives’ open interest has recently reached its highest levels since the FTX incident in late 2022, with a significant number of positions expiring and settling this week,” Youwei Yang, chief economist at Bit Mining Limited, said. 



“When considering implied volatility, the magnitude and slope of the three strong rebounds this year (January, March, and June) have progressively weakened, indicating a lack of greed in the market.”



But, as the end of the second quarter looms, <a href="https://blockworks.co/webinar/decoding-option-flows-key-insights-and-analysis-into-crypto-volatility">the volatility curve for the lower end of bitcoin is tilting upwards again</a>, with the implied volatility of put options surpassing that of call options.



“This indicates that the options market has transitioned from greed to fear, as market participants become increasingly concerned about a market decline,” Yang added.&nbsp;



Prior to the rally earlier this month, bitcoin dipped below $26,000, pushing traders to bet against a rally using options contracts. <a href="https://blockworks.co/news/bitcoin-touches-30k-stocks-dip">Bitcoin’s roughly 22% rally since June 14</a> was not what short sellers had anticipated.&nbsp;



Now, the token looks poised to be trading over the $30,000 level on Friday, when options contracts at Deribit expire at 8:00 am UTC.&nbsp;



“Basically, traders have opened a huge amount of calls at greater than $30,000,” Jan Sammut, vice president of marketing at Origin Protocol, said. “Therefore, market makers and dealers are holding a large amount of negative, or short, gamma.”&nbsp;



If bitcoin stays above $30,000, Sammut said, traders are going to buy on the spot market, fueling a gamma squeeze. But, if bitcoin dips below $30,000, traders are going to sell on the spot market to cover their positions.&nbsp;



“In summary, this impending expiration is one to break out the popcorn as you prepare to witness the unfolding drama,” Deribit’s Fernando said.



Updated Jun. 28, 2023 at 8:59 am ET: Shortened headline.



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Crypto volatility, options expirations create perfect storm

Notional open interest on the largest centralized crypto derivatives exchange hit a record high Wednesday, with demand for bitcoin options leading the way amid a turbulent time for the traditional finance industry.



Deribit’s notional open interest on the platform exceeded $20 billion Wednesday, according to the company. Most of that was attributed to $11.7 billion from bitcoin options — also an all-time high — and $6.9 billion from ether options.&nbsp;



The record comes after <a href="https://blockworks.co/news/silvergate-collapse-not-crypto-problem">the fall of Silvergate Bank</a>, <a href="https://blockworks.co/news/silicon-valley-bank-meltdown-has-little-to-do-with-crypto">Silicon Valley Bank</a> and <a href="https://blockworks.co/news/signature-possession-nothing-to-do-with-crypto">Signature Bank</a> in recent weeks, which some said has shaken trust in financial institutions.&nbsp;



“The first cause of it all could be that BTC is finally acting as a hedge for the traditional financial and especially banking system,” said Luuk Strijers, Deribit’s chief commercial officer. “Bitcoin has failed to meet expectations as an inflation hedge in the past but is finally acting as it was intended to do, triggering an elevated level of interest.”



Derivatives exchange CME Group has also seen consistent volume and open interest growth in its crypto futures and options products.&nbsp;



Its average daily bitcoin options open interest in 2023 is up an all-time record of 140% — a notional value of $936 million, a company spokesperson told Blockworks. CME bitcoin options hit record daily open interest on Tuesday, reaching a value of $1.55 billion.



A potential end to rate hikes could also be causing more interest in all risk assets, including bitcoin, Strijers told Blockworks. The <a href="https://blockworks.co/news/federal-reserve-interest-rate-25-bps-march">Federal Reserve raised interest rates by 25 basis points</a> Wednesday, continuing a trend of slower-paced increases after previous bumps of 0.5% and 0.75%.



Luke Hoersten, founder and CEO of bitcoin derivatives exchange Bitnomial, argued bitcoin has emerged as a safe store of value as people realize putting their money into US Treasury-backed cash deposits can be risky. Traders are moving money into bitcoin, he added, and using futures and options to protect themselves from price changes.&nbsp;&nbsp;



“Some traders are worried about synthetic cash-settled exposure because it can debase or de-peg as the environment becomes uncertain and more volatile,” Hoersten said. “Physically settled futures and options are a better choice because they give people native exposure to both cryptocurrency and fiat currency.”



CK Zheng, co-founder and chief investment officer of crypto hedge fund ZX Squared Capital, said he believes bitcoin is “starting a new cycle” after reaching a bottom following the bankruptcy of crypto exchange FTX last November.&nbsp;



He agreed the current banking crisis further validates bitcoin’s thesis as a digital gold of sorts against government money printing, and offered other reasons for the increased open interest in crypto derivatives.&nbsp;&nbsp;



“There are not many natural sellers, like crypto miners, who need to get rid of BTC, [and] the leverage in the crypto industry is no longer a great threat to this ecosystem,” Zheng explained. “The next BTC halving is coming early next year, which is very bullish given the design of the halving process.”



The halving refers to the bitcoin mining reward being reduced from 6.25 <a href="https://blockworks.co/tag/btc" target="_blank" rel="noreferrer noopener">BTC</a> per block to 3.125, <a href="https://blockworks.co/news/bitcoin-halving-a-year-out">anticipated to take place in April 2024</a>.



No matter the exact cause of the Deribit notional open interest record high, Strijers said, increased volatility implies investor interest in instruments that enable them to benefit from protecting themselves from the consequences.



“For us, this implies higher option volumes, an increase in the number of contracts outstanding, and more call buying to position for possible upside,” he said. “Now that the price has increased, we are also seeing some more put activity demonstrating clients&#8217; interest in potentially hedging downward risk,” he said.&nbsp;



The majority of Deribit’s bitcoin options contracts are for the strike price of $30,000. The strike price of an option is the level at which an investor can buy the underlying security in the case of a call, or sell it in the case of a put, before the contract expires.&nbsp;



Bitcoin’s price was roughly $28,100 at 3:00 pm ET — up 13.1% from seven days ago.&nbsp;



“$30,000 is the next resistance level,” Zheng said. “If BTC breaks this level convincingly, it will be very bullish for the near term.”



Updated March 22, 2023 at 5:05 pm ET: Added information about CME Group&#8217;s bitcoin options open interest.



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Deribit Bitcoin Options Open Interest Hits All-time High

Michael Bodley

<div id="highlights-block_61e8662cfe433" class="highlights">
 <ul>
 <li>SOL futures are set to be just the third cryptocurrency supported by Deribit, reflecting the need for market-maker coverage and liquidity in derivative products</li>
 <li>The offering came after Deribit picked up interest in SOL from market-makers </li>
 </ul>
 
</div>



Cryptocurrency derivatives exchange Deribit is rolling out SOL derivatives — the latest indicator of strong <a href="https://cms.blockworks.co/galaxy-launches-new-institutional-solana-fund-to-track-bloomberg-index/" target="_blank" rel="noreferrer noopener">institutional investor interest</a> in the Solana protocol.



Two sources familiar with the matter said Deribit has been gauging the interest of options market-makers on Solana products for several months. The company confirmed to Blockworks that it’s internally testing SOL options, with a launch slated for later this quarter or early in the second quarter.



The Panama-based company currently offers options on exclusively bitcoin and ether. Luuk Strijers, Dereibit’s chief commercial officer, said the firm had considered adding other coins before but was concerned about liquidity and coverage by market-makers.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Of course, we’ve had interest in other coins before, but not sufficient enough to ensure coverage — except for SOL now,” Strijers said. “It was really obvious there is demand for SOL, and it wasn&#8217;t that obvious before.”</blockquote>



Deribit, which accepts only crypto deposits, is in the process of building a Solana wallet to facilitate those trades. Users will have to deposit SOL to trade SOL derivatives. The company plans to offer perpetual trading, options, futures and portfolio margining services.



Futures and options on SOL now trade over the counter and via a select number of smaller exchanges. Deribit’s offering ought to substantially expand their trading volume, sources said.&nbsp;



One crypto hedge fund manager gearing up to trade SOL for the first time said the derivatives offering is a welcome means to give institutional investors the ability to place directional bets on the cryptocurrency.



Deribit’s clients are split between about 80% institutions and 20% retail investors. The company earlier this month upgraded its platform to reduce latency by 25%.



Meanwhile, the derivatives specialist has been working on launching support for USDC. That would take the form of perpetual trades priced and margined in the popular stablecoin — including bitcoin to USDC and ether to USDC.



It would allow contracts to settle in USDC instead of a particular coin, giving the company the ability to offer additional coins in future without having to build a wallet for each asset.

Deribit

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