Crypto Derivatives Markets: Bitcoin vs. Ethereum

Introduction

Derivatives play a crucial role in financial markets, providing essential tools for hedging, speculation and price discovery. These instruments derive value from the 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.

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

The growing adoption of these derivatives shows their importance in improving 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.

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