<p><b>Executive Summary </b></p> <p><span style="font-weight: 400;">This report provides key insights into the state of the crypto derivatives market. Section 1 </span><span style="font-weight: 400;">starts by highlighting the increasing inflow of institutional capital into the crypto space. It </span><span style="font-weight: 400;">then outlines the main crypto derivative products and their differences to those in the </span><span style="font-weight: 400;">traditional finance space. </span><span style="font-weight: 400;"><br /> </span></p> <p><span style="font-weight: 400;">Section 2 takes stock of the state and recent developments in the crypto derivatives </span><span style="font-weight: 400;">market by looking at the four key metrics i) volume, ii) open interest, iii) funding rates, and </span><span style="font-weight: 400;">iv) implied volatility. It provides several insights:</span><span style="font-weight: 400;"><br /> </span></p> <ul> <li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">Both volume and open interest metrics indicate that the crypto derivatives market has grown considerably; </span><span style="font-weight: 400;"><br /> </span></li> <li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">Activity in crypto options relative to futures is set to grow strongly if ratios of options to futures for (i) open interest and (ii) volume converge to those found in the traditional finance space;</span><span style="font-weight: 400;"><br /> </span></li> <li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">Activity on the crypto derivatives market continues to exceed that on spot markets, indicating some degree of market maturation; </span><span style="font-weight: 400;"><br /> </span></li> <li style="font-weight: 400;" aria-level="1"><span style="font-weight: 400;">Implied volatility is still relatively high in comparison to equity markets, but continues to trend downwards, and funding rates have been compressed. </span></li> </ul> <p><span style="font-weight: 400;"><br /> </span><span style="font-weight: 400;">Section 3 sheds light on the major derivative trading venues, which are providing the </span><span style="font-weight: 400;">infrastructure that makes possible the strong growth in the crypto derivatives space. It is </span><span style="font-weight: 400;">shown that most crypto derivative venues are of a centralized crypto-native nature. In </span><span style="font-weight: 400;">addition, it is discussed how liquidity network service providers give investors access to </span><span style="font-weight: 400;">aggregated liquidity from crypto exchanges and OTC venues to address liquidity </span><span style="font-weight: 400;">fragmentation. This aggregation may result in better liquidity, transparency, and pricing. </span></p> <p><span style="font-weight: 400;">Section 4 concludes and provides an outlook on future growth and developments in case </span><span style="font-weight: 400;">there is further regulatory scrutiny.</span></p><br /><span class="copyright"><p>© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.</p> </span>