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Bitcoin derivatives trading volume larger than the Bitcoin spot market

While cryptocurrency derivatives are still a relatively new product, trading Bitcoin futures and options has never been more popular.

According to estimates from data trackers Skew and BitcoinTradeVolume, the daily trading volume of derivatives is 10 to 18 times higher than that of the Bitcoin spot market.

A report from Bloomberg noted that definitive figures are hard to come by, so it is estimated that between $5 and $10 billion in crypto derivatives are traded globally every day.

Exchanges based in Asia, such as BitMex and Huobi make up most of that volume, with BitMex alone trading $1.82 billion worth of Bitcoin futures in 24 hours. Data from Skew showed that Huobi had $1 billion in daily trading volume, while Malta-based Binance, which introduced futures less than two months ago, traded around $560 million.

Andy Cheung, the head of Hong Kong operations for crypto exchange OKEx, said that twice as many people have been trading derivatives than actual coins in 2019.

A testament to just how big and lucrative the derivatives trading market actually is is none else than Binance.

One of the world's largest spot exchanges by trading volume, Binance launched its own derivatives platform at the beginning of September and is trading around $500 million in futures per day, Bloomberg reported.

Lack of excitement in spot market pushes traders into derivatives

Changpeng Zhao, the CEO of Binance, told Bloomberg that futures trading is cheaper than spot trading.

"When trading with leverage, traders don’t have to tie up as much capital as you would trading spot," he said.

Last week, Binance introduced leverage of as much as 125 times the value of the contract, becoming a direct competitor to platforms such as BitMex, which offers a 100x leverage on its futures products.

"BitMex is probably at the center of the whole ecosystem right now," Sid Shekhar, co-founder of London-based tracker TokenAnalyst, said.

The exchange itself has said that the lack of daily volatility Bitcoin has seen lately pushed traders into derivatives trading.

But, not everyone is pleased with such development. Emmanuel Goh, the CEO of Skew and a former derivatives trader at JPMorgan, told Bloomberg the use cases for derivatives in crypto are everything but noble.

"The main use case around this product so far has been around speculation."

This statement isn't all that far-fetched, either—more tightly regulated derivatives products with lower leverage weren't as well-received as their more turbo-charged competition.

The Chicago Board Options Exchange (Cboe) stopped offering Bitcoin futures due to lack of interest, while Bakkt's physically delivered Bitcoin futures were one of the most disappointing launches this year.