Deribit to Launch Daily BTC Options as Regulated Competition Heats Up

Deribit is launching daily options as the exchange faces increasing competition in the crypto options market.

Deribit announced this week it would begin offering daily bitcoin index options Feb. 3. Scheduled every day at 08:00 UTC, users will be able to begin trading options at a strike price intervals of $125. Contracts expire two days after being listed.

The exchange will try to offer contracts that move within a 5 percent range around at-the-money (ATM) levels, Deribit's post said. The news gives traders a much wider range of expiry dates, and the platform will now have contracts that expire every day.

"These short-dated expiries are specifically interesting for investors and traders with a short-term view based on for example macroeconomic data or events," the post reads. Deribit's chief communication officer, Luuk Strijers, told CoinDesk the exchange had introduced daily options in response to "market demand."

Increasing competition

Launching in 2016, Deribit dominates the cryptocurrency options market. Data from analytics firm Skew shows Deribit options made up nearly 90 percent – approximately $50 million worth – of the total volume traded on Tuesday. In comparison, regulated platform Bakkt made no trades and CME option contracts made up approximately 2 percent of the trading volume.

Regulated bitcoin options have only begun trading in the past couple of months. Bakkt launched options trading just before the holiday season and CME followed suit, launching its options contracts earlier in January. OKEx launched unregulated options contracts on Dec. 26.

The data shows Deribit has remained in pole position and, as the graph below shows, had a record month for volume in December. But the monthly market share has also decreased, falling approximately 10 percent in January.

That coincides with rival options exchanges experiencing month-on-month increases in combined trading volume. Predominantly this appears to be coming from OKEx and CME, as Bakkt reported zero volume on its own platform last week.

Emmanuel Goh, co-founder and CEO of Skew, said he wasn't surprised Deribit's market share was falling to new competitors. The exchange had the first-mover advantage but that was always going to decrease as other companies entered the space. "Market share falls when you add more exchanges into the mix," he said.

OKEx has been able to quickly storm into second place because it has been able to offer new products to its existing client base in Asia. According to Goh, what's important is that "the pie is still growing," with Deribit's volumes rising as part of a much larger increase in the broader crypto options market.

But the introduction of daily options could make Deribit more competitive. Mati Greenspan, the founder of analyst firm Quantum Economics, said adding new products usually helps an exchange broaden its potential client base.

"Every client is unique and will have different trading styles, strategies and demands from their broker. So having more products helps the provider to satisfy more customers. A good broker will have a tendency to understand their clients' needs and will take them into account when creating new products and services," he said.

Like in traditional markets, Strijers said Deribit expects daily options will take up a "sizable percentage of volumes." With increasing volatility in January 2020, he added, "We again see significant month-on-month growth and only expect further growth due to the expansion of tradable options."

Edit (08:00 UTC, Feb. 3, 2020): We've fixed a line that incorrectly described strike price intervals.