Investors Can Hedge Long-Term Risk With New 2-Year Bitcoin Derivatives

Quedex's new bitcoin derivatives contracts, which expire in December 2021, saw more than $5 million in volume last weekend.

Mar 13, 2020 at 10:15 a.m. UTC
Updated Sep 14, 2021 at 8:19 a.m. UTC

Quedex, a Gibraltar-regulated derivatives exchange, recently launched a bitcoin contract with the longest expiration date in crypto.

The CEO of Quedex Bitcoin Derivatives Exchange, Wiktor Gromniak, told CoinDesk the firm had experienced a surge in investor interest in its new BTCUSD contract, which expires in December 2021 and only became tradable last Friday.

Quedex volumes surged past a record $5 million on Saturday, beating the previous all-time high of $2 million reached in February, according to the exchange.

"The new December 2021 products account for about 5 to 15 percent of total volume on the exchange ... we see it as relatively high and promising for a product which [has been] live for less than a week," Gromniak said. "What's interesting is that the new December 2021 expiry options are the most popular among options products."

Quedex's total volumes peaked at over $16 million between March 6 and March 13, more than the exchange's $9.8 million weekly average. Over the same timeframe, volumes for the December 2021 contracts came in at $1.2 million with most activity taking place on Thursday, where volumes peaked at nearly $900,000, according to Gromniak.

Operating since 2016, Quedex is regulated by the Gibraltar Financial Services Commission and offers various bitcoin-denominated products. As well as the two-year product, the exchange also offers contracts with expiries ranging from a week, to a month, to a quarter. Clients can also use a margin trading facility that comes with up to 10 times leverage.

The new contract's launch came before the coronavirus pandemic triggered mass sell-offs across both traditional and crypto markets. Contrary to the widely held safe-haven narrative, bitcoin's (BTC) price dropped to a 10-month low on Thursday, taking many traders completely unawares. Forced liquidations of long positions on derivatives exchange BitMEX have soared past $700 million, adding further downward pressure to the spot price.

While volatility is likely to continue for contracts with short term expiries, Gromniak attributes surging interest in his longer-dated products to investors trying to hedge their long-term exposure. Contracts with longer expiry dates, such as in two years' time, are not influenced by market downtrends such as the one sparked by the coronavirus, he said.

Previously, exchanges OKEx and FTX had the longest-reaching contracts that expired in December 2020. The longest contracts available on Deribit lists expire in September. Gromniak said Quedex would consider adding contracts with even longer expiration dates, but added the company would wait to see first if there was sufficient demand from the market.

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