Crypto Derivatives Are Thriving, and There’s Still More Room For Growth
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- FTX’s US business will cooperate with ISDA.
- Derivatives DEXes might employ fractionalized NFTs as margin.
FTX, a renowned crypto derivatives exchange, joined the International Swaps and Derivatives Association (ISDA). FTX’s US business will cooperate with ISDA to develop crypto derivatives markets in the US and globally.
The ISDA Master Agreement establishes rules for OTC derivatives transactions, making them “safer and more efficient.” Most significantly, membership in the organization increases liquidity by facilitating member-to-member transactions. This is another indicator that crypto derivatives are becoming mainstream. The ISDA has around 960 members from 78 countries.
Recent research by Carnegie Mellon University found that crypto derivatives are “incredibly popular.” On a busy day, derivatives trade for over $100 billion, matching the NYSE’s daily turnover. The trading volume of crypto derivatives is five times that of crypto spot markets. According to co-author Nicolas Christin, Crypto derivatives markets have started to eclipse regular markets.
The decentralized derivative exchanges and synthetic assets will impact the crypto sector and traders and assets outside of it. A synthetic asset is a token created on the blockchain that derives its value from an underlying asset such as equities, stock market indexes, or commodities.
NFT-DeFi fusion
DeFi’s composable smart contracts enable digital assets to move easily across chains. Consequently, traders may employ AMM, lending protocol, and yield aggregator LP tokens as margin.
NFT-DeFi fusion has opened up new possibilities, according to IOSG Ventures. Derivatives DEXes might employ fractionalized NFTs as margin. Decentralized derivatives protocols have a substantially wider Total Addressable Market (TAM) than centralized counterparts.
However, conventional finance still accounts for a large percentage of the worldwide derivatives market. As decentralized protocols evolve, more value will be transferred to the DeFi ecosystem. It’s worth noting that derivatives DEXes are not limited to crypto. They also let users tokenize real-world assets.
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