Welcome to the Crypto.com Monthly Research Roundup Newsletter!
1. Market Index
The 30-day price, volume, and volatility indices were negative at -3.78%, -2.37%, and -5.82%, respectively.
2. Monthly Feature Articles
Monthly Feature Article | Overview of Decentralised Derivatives
The crypto asset market has expanded significantly and matured rapidly in the last few years. While this development translates into many vectors — including the emerging innovations in the trading space, among others — one key indicator we can look into is the rapid growth of the crypto derivatives market. As a primer, our first feature report provides an overview of mainstream derivatives offered in the DeFi market today, their features and latest market information, and other derivative types such as everlasting options and power perpetuals. Check out: Overview of Decentralised Derivatives.
- Crypto derivatives continued to dominate the market, representing above 70% of the entire crypto space, and are worth US$2.04 trillion today.
- CEXes lead the crypto derivatives market by a wide margin. However, decentralised derivatives exploded in 2022. Furthermore, perpetuals make up 90% of TVL of DeFi derivatives, with leading players like GMX, dYdX, and Gains Network driving its growth.
- Dopex and Lyra, which are options protocols built on Layer-2 networks, came into the spotlight last year. Opyn, a DeFi options trading protocol on Ethereum, gained traction in the first half of 2022 but lost market share in the second half. Dopex is pioneering the development of ‘OpFi’ (Options-powered DeFi), which is seen as the next driver in DeFi.
- New entrants like Fulcrom Finance provide alternative venues to trade perpetual contracts. Fulcrom is a decentralised perpetual exchange built on the Cronos blockchain, offering innovative on-chain derivatives while providing traders with a safe and dependable way to access them on Cronos. It allows users to trade leveraged positions with low fees and negligible price impact, while also ensuring that all transactions and collateral are transparently recorded on the blockchain.
- Aside from perpetual futures and options, there are other derivative types in the market today. Everlasting options are considered the equivalent of perpetual futures, giving traders long-term options exposure without having to roll their positions forward. Meanwhile power perpetuals are perpetual derivatives indexed to a power of the price of an underlying asset. A quadratic power perpetual like Squeeth draws parallel to a perpetual swap, tracking the price of ETH to the power of two.
Monthly Feature Article | Deep Dive Into Decentralised Derivatives
We dive deep into decentralised derivatives, which aim to achieve the same objectives as traditional derivatives: hedging price risk and acquiring exposure to the underlying asset’s value without actually owning it. We take GMX and Gains Network as examples as they gained traction throughout 2022, having kept sustainable growth even though the decentralised derivatives market shrank. In this report, we explore their key features, mechanisms, and how these two protocols sustained their growth during the bear market. We also analysed what ‘real yield’ entails within the context of decentralised derivatives, and shed light on the risks that come with them.
- Both GMX and Gains Network are DeFi protocols that provide ‘perpetual swaps’:
- GMX is arguably the largest decentralised derivatives platform, according to its TVL. GMX features a multi-asset pool that supports leverage trading with zero slippage.
- Gains Network‘s most popular product is gTrade, a decentralised synthetic leveraged trading platform. Users can trade cryptocurrencies, stocks, and the forex market.
- One of the key factors that enabled decentralised derivatives to rise during the bear market is their sustainability, boasting real utility, earning real fees, and delivering ‘real yield’, as opposed to the unsustainable and inflated yield offerings of other DeFi projects.
- Although GMX and gTrade are popular and combine the functions in both perpetual swaps and DeFi, users should understand their complex features and risks before trading.
- Decentralised derivatives trading is a double-edged sword for traders. On one side, it can generate real yield; on the other side, leverage can amplify both gains and losses. What’s more, the market follows the 20/80 rule, where only a small proportion of traders can turn a profit.
This monthly feature article is exclusive to our private members.
Monthly Feature Article | OpFi: Options Powered DeFi
What exactly is OpFi? Still in its nascent stages, ‘Options-powered DeFi’ is an innovation in the decentralised finance space that utilises options to power DeFi infrastructure. OpFi aims to remove the complexity that typically comes from trading options, and can potentially address some of the challenges faced by DeFi functions (e.g. forced liquidations, and high fees for token swaps, among others). In our latest private report, we answer all your questions around OpFi.
- The use of options can potentially help to address some of the challenges in DeFi functions such as, but not limited to, forced liquidations of collateral in lending and leveraged products, high fees for token swaps, and uncertainty around the direction of prices when speculating on volatility.
- OpFi has been discussed in the crypto space since the start of this year, especially following the success of decentralised derivatives protocols like GMX and Gains Network. One of the projects pioneering OpFi is Dopex, with its suite of solutions like Atlantic options, Atlantic straddles and insured perps, synthetic option perps, put-based lending, and stablecoin option vaults.
This monthly feature article is exclusive to our private members.
3. Alpha Navigator
This institutional-focused report dives into macro trends, market-neutral pair trades, style-factor screens, and event-driven ideas. Read the full Alpha Navigator report here.
- Following a good start to 2023, risk assets took a breather and sold-off in February. Crypto, however, was an exception, with BTC and ETH up slightly and still outperforming by a large margin on a YTD basis.
- BTC’s correlation with other risk assets fell into negative territory during February.
4. Crypto Conference & Economic Calendar from Market Pulse
Crypto Conferences Calendar
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Research & Insights Team