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How To Trade Derivatives In 2020

Author: nicolas tang

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2019 has seen quite some action when it comes to derivatives trading. Both old and new players are competing to provide the best derivatives trading services. Actually, there are virtually derivatives products based on all financial assets that are in the market today.

Some of the new entries into the derivatives industry are the cryptocurrency derivatives. Crypto exchanges are in a race to introduce different cryptocurrency derivatives. This is notably due to a hike in crypto derivatives interest among crypto investors.

A Review of 2019

Exchanges like Phemex have created platforms that are fully dedicated to offering crypto derivatives services. Also, renowned exchanges are creating derivatives provisions on their platforms to net in the derivatives traders.

However, most of the new players have found it quite rough as they maneuver the regulatory authorities. Most of the platforms like Phemex, Bakkt, and Tassat have been able to list Bitcoin and Ethereum futures, swaps as well as perpetual contracts.

Bitcoin derivatives, which have been the favorites for both institutional and retail traders in 2019 are expected to continue with the trend come 2020. In 2019, Bitcoin derivatives transitioned from a small market into taking a noteworthy position in the industry.

In countries like the US crypto derivatives adoption has risen sharply over the last few months. For instance, the Chicago Mercantile Exchange (CME) announced that it had facilitated over 2 million contracts during its second anniversary of the Bitcoin futures launch towards the end of 2019. Most notably among CME futures is that nearly half of the traded volume was made by investors outside the US.

In Singapore, authorities have taken great strides towards formulating proper regulations for the industry.

But as some countries embrace crypto derivatives, some are still not sure of whether to let them continue thriving or ban them. In the United Kingdom, authorities are reportedly planning to ban crypto derivatives due to customer protection. Though stakeholders are against the idea, the UK government said that it shall not interfere with the authorities’ decision.

Crypto derivatives prospects in 2020

Experts predict that the Asian market holds the greatest potential for crypto derivatives expansion in 2020. Some of the old players like Bakkt have already started tapping into the region while new players like Phemex, which is a native, are also rising to grab the opportunity.

Following the constant increase in cryptocurrency derivatives over the years, 2020 expected to see more action. However, as the crypto derivatives increase, the cryptocurrency spot prices may be affected negatively. Though only time can tell since cryptocurrency prices are affected by quite a number of factors and derivatives may not be enough to dictate their prices.

Generally, there is a high optimism around the stakeholders that the industry will make greater strides in 2020. However, that shall only be possible if countries around the world move towards making regulations for the industry rather than opting to ban the crypto derivatives. If countries adopt the UK’s approach, the industry could be greatly hurt.

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