In line with a recent report by ‘Bloomberg‘, cryptocurrency investors along with crypto miners are turning to derivatives like options in an attempt to survive the drawn-out market downtrend.
The recent article presents the increasing popularity of complicated trading instruments as a way of pocketing cash short term as being characteristic of how troublesome it has become to weather this ongoing bearish market trends – the longest within the crypto ‘history‘.
The chief executive officer of Alameda research named ‘Sam Bankman-Fried’, a quantitative trading firm for digital assets situated in Sans Francisco, stated Bloomberg:
“Anyone sitting on a stockpile of tokens saw within the bearish market of last year that their business is at the mercy of crypto prices. However, it is crucial for those players’ survival to own some cash if digital asset prices go down.”
With a number of seasoned financial professionals entering into the crypto assets area, the range of refined trading instruments has distributed. As an example, Bloomberg cites a representative from a renowned Singapore-based crypto mercantilism firm named QCP Capital, who disclosed that the firm had recently bought a three-month decision possibility for a notional sum equivalent to 250 Bitcoin’s [BTC] around $900,000 USD.
The strike worth of the aforesaid contract has reportedly been set to $4,200 USD— so if Bitcoin [BTC] is trading below this at the time of the contract’s end, QCP’s counterparty can pocket a $666,250 USD premium and keep its Bitcoin [BTC] holdings. If, conversely, by April, Bitcoin [BTC] is trading above the $4,200 USD, the counterparty would be required to sell its 250 Bitcoins [BTC], at that worth, forging any prospective gains.
Given the very fact that several of these derivatives contracts are personal bilateral contracts, as Bloomberg added, official statistics are scarce. Yet, the article contends that miners — ‘squeezed‘ by falling market costs – became one among the major sellers of a type of derivative like a covered call options.
The article goes on to warn that in several cases, technical innovators being pushed to brush shoulders with ex-Wall Street staffers can be akin to “swimming with sharks,” given the latter’s wealth of expertise. One ex-Citigroup credit derivatives merchandiser turned crypto miner adding:
“[Miners]’d better be on their guard against being duped by the clued-in derivatives grounds. The trading professionals would try to take the miners for a ride by getting them to sell options too cheaply.”
As reported earlier this week, the ‘ICO‘ [initial coin offering] market took a steep tumble last year — not in terms of overall capital raised, however in terms of the no. of distinctive projects, that has been steady falling since Q1 last year. The article identified restrictive uncertainity, abroad the market price collapse, as major factors driving towards this ‘decline‘.