World’s largest cryptocurrency exchange, Binance, announces addition of options contracts for Ethereum and XRP. It becomes the first exchange to add support XRP options.
Options are financial derivatives with leverage which allows the buyer of the contracts to buy (call option) or sell (put option) the underlying asset at a specified price on expiry.
— Binance (@binance) May 25, 2020
Until now, Deribit exchange has been the leading platform for Ethereum options and also leading the space for Bitcoin options with over 75% market share. The average Open Interest for Ethereum options on Deribit since launch in May last year is around $39 million. It is currently at at an All-Time High with respect to number of ETH. Nevertheless, Binance aims to dominate that market as well.
Moreover, the addition of XRP options is likely to up the ante on altcoin speculations as well. BitMEX was the one of the first major derivatives exchange to offer XRP futures in February this year, besides Binance, Okex, Poloniex and a select few exchanges. Binance is one of the few exchanges which offers futures contracts for a variety of cryptocurrenices.
While the risk is reduced with options contracts, the choice of trading futures or options depends on the preference of traders. Furthermore, the premium around the price of options can act as a robust indicator of market sentiments. However, it also stands to add more volatility in prices.
Do you think the addition of trading products is good or bad for long-term adoption of cryptocurrencies? Please share your views with us.
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Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com