Investors are Moving Toward Derivatives to Survive ‘Crypto Winter’

Through these classic instruments, crypto holders are trying to get some quick cash.

The dominating bear in the cryptocurrency market has forced investors to turn to derivatives to survive the financial bloodbath, according to a Bloomberg report.

According to the publication, crypto investors dominated by software developers and tech experts are even negotiating with seasoned Wall Street professionals on complex financial instruments to pocket some short term cash.

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Sam Bankman-Fried, chief executive officer at the San Francisco-based quantitive trading firm Alameda Research, told Bloomberg: “Anyone sitting on a stockpile of tokens saw in the bear market of 2018 that their business is at the mercy of crypto prices. It can be crucial for those players’ survival to have some cash if digital asset prices go down.”

The article pointed out that crypto miners are among the main sellers of derivatives as they need to liquidate their digital assets to continue running their mining operation.

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No Official Data

The official statistics of these contracts are hard to gather as unlike listed derivatives, these are mostly bilateral contracts between two parties. The traders’ estimates varied drastically across the world as to them the monthly sales volume can range anywhere between $150 million to $500million.

However, according to Cedric Jeanson, CEO of blockchain asset management and advisory firm BitSpread, cryptocurrency options contracts are declining rapidly in recent months.

The falling prices also turned into a headache for the miners as it is becoming very hard to squeeze any profits from the mining operations.

Bitcoin’s value tanked from nearly $20,000 in December 2017 to the present value of $3,600 – a drop of more than 80 percent. The market as a whole also shed hundreds of billions as the total market value went down from $827 billion to merely $121 billion.

“[Miners] better be on their guard against being duped by the clued-in derivatives houses. The trading professionals will try to take the miners for a ride by getting them to sell options too cheaply,” said Sath Ganesarajah, a former Citigroup credit derivatives trader.

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