Crypto derivatives markets: Bitcoin vs. Ethereum

Derivatives play a crucial role in financial markets, providing essential tools for hedging, speculation, and price discovery. These instruments derive value from underlying assets, allowing market participants to manage risk and gain exposure to asset price movements without directly owning the assets. In the traditional financial market, derivatives are a massive category. The Bank for International Settlements (BIS) reported that the notional amount of over-the-counter (OTC) derivatives reached $667 trillion at the end of last year.

While the crypto derivatives market is significantly smaller than that, it has grown substantially in the past couple of years and has become an essential part of the broader market. Crypto derivatives have become indispensable tools for managing the inherent volatility and leveraging investment strategies. Bitcoin (BTC) and Ethereum (ETH) derivatives are the pillars of this relatively young market, despite many other derivatives products based on smaller cryptocurrencies.

The growing adoption of these derivatives shows their importance in enhancing market liquidity, enabling sophisticated trading strategies, and facilitating price discovery. In this report, CryptoSlate will explore the theoretical and practical differences between BTC and ETH and their respective futures, options, and perpetual futures markets.