Maturity of the Crypto Derivatives Market Attracting More Institutional Investors

In a Cointelegraph China Great Bay Area International Blockchain Week pre-event interview on July 29, Ben Zhou, CEO of derivative exchange Bybit, argued that the maturity of the derivatives market is the main reason for institutions to enter the crypto space. 

Biggest concerns for institutional investors  

Zhou says that the biggest concern for any institution exploring crypto is the need for proper financial tools to run risk management. Risk management is out of reach without a functional, robust derivatives market. He stressed that: 

“Derivatives markets serve a vital function by contributing to liquidity, providing proper risk management tools and different product options. Therefore such is how I see the cause and effect when it comes to this topic.”

Although regulation only plays a small part in attracting institutions, Zhou also believes Increased regulatory attention is a positive development and a sign of maturation of the crypto industry as a whole. He added that: 

“When the bar of play rises, those that are built for the long run and truly provide value for users will emerge as the biggest winners.”

Crypto maturity and traditional finance

Zhou says the recent surge of Bitcoin prices is partially attributable to the increasing demand. This is heralded by the entry of more and more institutional investors, just as the supply dwindles following this year’s halving. He continued that: 

“The confidence of financial institutions also lends a legitimizing sheen and helps people to see crypto more as money. Continuing improvements in the crypto infrastructure will gradually allow people to do more with the cryptocurrencies, which will in turn grant them more inherent value. There may not be a single event where everyone will all of a sudden agree that crypto has achieved mainstream status. But when we look back to this moment of time some time in the crypto future, we may arrive at the conclusion that in a way the gradual process has already started.”

Standing in contrast to the traditional world of finance, cryptocurrencies present people with an alternative approach. This is thanks to their range of innate and systemic strengths, says Zhou. It is important to note that crypto and traditional finance are not diametrically opposed forces. He pointed out that:  

“Financial institutions are already facilitating the entry to the crypto world with fiat gateways and providing custodian services. With wider adoption and increasing maturation of cryptocurrencies, we are bound to see more areas of convergence and increasing overlap of the two sectors.”

Zhou also revealed plans for the exchange to open more pairs, such as ETH/USDT, BCH/USDT, LTC/USDT, XTZ/USDT, and LINK/ USDT, for derivative trading in the near future.