Derivatives are driving the growth and sophistication of investment in cryptocurrency markets. These financial instruments linked to major digital assets like Bitcoin (BTC), Ethereum (ETH), and various altcoins now account for the majority of daily volume, outpacing spot trading in size and impact.
From large hedge funds to individual retail traders, the use of crypto derivatives such as futures, options, and perpetual swaps has become central to market activity. In addition to speculating on prices, derivatives trading enables participants to hedge risk, manage their exposure and unlock liquidity without having to own the underlying asset.
Understanding how these instruments work and how they are shaping crypto markets is important for institutional and retail traders as well as policymakers.
Key Takeaways
- Derivatives markets are expanding rapidly, with new tools attracting diverse users and fueling broader adoption across the crypto landscape.
- Institutional players are embracing crypto derivatives for hedging, exposure, and portfolio optimization, prioritizing execution speed and capital efficiency.
- Perpetuals trading reached a record $58.5 trillion in 2024 across the top 10 centralized exchanges.
- Hybrid platforms signal convergence, blending CEX-level privacy and infrastructure with DEX-style composability.
- The next stage of crypto derivatives trading is likely to be shaped by AI, interoperability and regulatory clarity.
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Crypto Derivatives Volumes Explode
“Over the past two years, crypto derivatives have evolved from a niche product for speculators into something with genuine systemic importance,” Gracy Chen, CEO of Bitget, told Techopedia.
“In 2025 alone, global annual derivative volumes are approaching an estimated $10 trillion, driven by institutional participation, product innovation like options and tokenized futures, and more clarity from regulators in markets such as the EU and US.”
As the market matures, the use of derivatives has expanded beyond simple speculation to decentralized finance (DeFi) protocol hedging, DAO treasury management, algorithmic trading strategies, and as capital-efficient hedging tools.
As in traditional financial markets, crypto derivatives can be physical or cash-settled. Cash settlement involves paying the profit or loss in fiat or stablecoins and is the model used across most centralized platforms. Physical settlement involves the actual delivery of the crypto asset upon contract maturity. This is less common owing to operational complexity.
Futures are among the most popular types of derivatives. These are standardized agreements to buy or sell a digital asset at a predetermined price on a specified future date. They allow traders to speculate on asset price movements without owning the underlying coin or token. Unlike spot markets, futures enable leveraged exposure, directional bets and portfolio hedging.
The rise of derivatives began to take off in 2016 with the launch of perpetual swaps by BitMEX. Since then, the market has exploded, with trading of perpetuals contracts (known as perps) hitting a record $58.5 trillion in 2024 across the top 10 centralized exchanges (CEXs), according to Coingecko’s State of Crypto Perpetuals 2024 report. The 10 exchanges reported $21.2 trillion in trading volume during the fourth quarter of last year, a 79.6% increase from $11.8 trillion in the third quarter.
Unlike futures, crypto perpetuals contracts do not expire on a specified date. Perps dominate crypto derivatives trading, accounting for over 70% of total volume, as their high leverage and simplicity attract novice and professional traders.
Globally, the volume of exchange-traded crypto derivatives reached a record high of 20.09 billion contracts in September 2024. This growth reflects increased institutional interest, market maturity, greater acceptance of cryptocurrencies in traditional finance, and growing trust in stablecoins, which are often used as quote assets in on-chain derivatives, according to Bitget.
Open interest (OI), the total value of active, non-closed derivative contracts and a gauge of market depth and trader commitment, hit record highs above $80 billion in late May, according to Bitget’s report Crypto Derivatives 101 – Market Breakdown: Who’s Winning the Race?, co-released with Bitcoin.com.
Types of Crypto Derivatives Trader
There are three main types of crypto derivatives trader:
Institutional hedgers: Asset managers and corporate treasuries often use futures to lock in crypto values over a planning horizon. Trading positions can range from $5 million to $500 million per position on large spot BTC or ETH holdings to protect portfolio value from market downturns.
Speculators: Retail or professional traders take long or short positions to profit from volatility with a typical trading range of $1,000 to $500,000 per position. A swing trader may open a $50,000 BTC perpetual contract using 10x leverage with $5,000 margin during bullish sentiment, with the aim of making outsized gains.
Prop firms: High-frequency trading firms or arbitrage desks use futures to profit from market inefficiencies. Capital size can range from $500,000 to $100+ million. A firm might simultaneously buy BTC spot and short BTC futures when futures are overpriced, capturing the basis spread.
Bitcoin Holds Dominance in Derivatives
Bitcoin derivatives account for over 55% of total crypto derivatives volume. As the first and most widely held cryptocurrency, BTC serves as the primary benchmark for investor sentiment and a crucial hedging instrument for institutional and retail traders.
Futures and perps on Bitcoin provide traders with flexible ways to speculate on price movements, manage portfolio risk and conduct basis or funding rate arbitrage. Bitcoin options enable more complex trading strategies such as covered calls, protective puts and straddles. These instruments allow traders to express directional bias or protect long holdings during macro uncertainty and price volatility.
Convenience or Control: CEXs vs DEXs
Choosing between centralized exchanges and decentralized exchanges (DEXs) has long been a debate in the crypto industry. As crypto derivatives exchange markets mature, understanding the strengths and trade-offs of each is important for traders seeking to align their platform choice with their trading goals and risk tolerance.
“Centralized exchanges offer deep liquidity, fast execution, integrated fiat on‑ramps, and risk-control features like guaranteed funding rates. That makes them ideal for both retail and sophisticated traders,” Chen said. “By contrast, perpetual swaps on DEXs give users complete custody and transparency, no withdrawals, no counterparty risk but they tend to have lower liquidity, fewer pairing options, and less intuitive interfaces. DEX users also face more slippage and limited margin mechanics.”
Comparing CEX and DEX perpetual markets highlights the trade-offs between liquidity, slippage, fees, user experience and composability.
Decentralized perp exchanges recorded significant growth in 2024, with fourth-quarter trading volume reaching $492.8 billion, an increase of 55.9% from $316.2 billion during the third quarter. In total, the top 10 DEXs recorded $1.5 trillion in trading volume in 2024, a jump of 138.1% from $647.6 billion in 2023.
The gap between CEX convenience and DEX autonomy is shrinking fast, as exchanges offer a new generation of hybrid solutions and cross-platform integrations.
“At Bitget, we see hybrid approaches emerging that combine the best of each model to serve different trader profiles,” Chen said.
CEXs are investing heavily in user-friendly Web3 wallets with intuitive interfaces, integrated trading support and smooth on-chain asset management. CEX-linked wallets now offer multi-chain asset handling, real-time price feeds, fiat on-ramps and swap aggregators, aiming to make Web3 navigation seamless.
Several major exchanges have rolled out comprehensive Web3 wallets that extend their reach into the DeFi space, such as Trust Wallet, owned by Binance, which offers native staking, decentralized app (Dapp) browsing, and direct token swaps, all integrated with Binance’s ecosystem for seamless asset transfer between CEX and DEX. Other exchanges such as OKX and Bybit also have similar Web3 wallets with multi-chain support, NFT marketplaces, and DeFi yield services.
| User Type | Key Priorities | CEXs (e.g. Bitget, Binance, Bybit) | DEXs (e.g. Hyperliquid, others) |
|---|---|---|---|
| Retail Small-Cap Traders | Low fees, fiat access, clean UI, simple onboarding | Best for ease-of-use, fiat onramps, and low trading feesSuited to non-technical users | Offers anonymity and custody controlHigher complexity for non-crypto-native users |
| Institutional/High-Volume | Execution speed, liquidity, margin efficiency | Preferred venue for large trades, tight spreads, and margin toolsBinance excels in scaleBitget offers fee flexibility | Gaining traction in DeFi-native institutionsLimited by compliance hurdles and cost inefficiencies |
| DeFi-Native/Integrated | Composability, control, yield potential, trade privacy | Bitget Onchain and others provide hybrid optionsStronger privacy and sniping protection | High composability and yield opportunitiesFull transparency can expose strategies to liquidation sniping risks |
Institutional Appetite Rises for Strategic Exposure
As the crypto derivatives market matures, it is capturing the attention of financial institutions. Hedge funds, trading firms, and asset managers now use crypto futures and perpetual contracts to manage volatility, capitalize on arbitrage opportunities, and diversify portfolios without directly holding spot assets.
“Institutional allocators are using derivatives not just to speculate but to hedge, arbitrage, and manage capital efficiency. At the same time, advances in risk-management tools like auto-deleveraging and smart margin systems have also lowered entry barriers. Derivatives now offer both liquidity and sophistication that spot markets can’t match,” Chen said.
Institutions gravitate toward centralized exchanges like Binance and Bitget for their deep liquidity, robust infrastructure, and advanced risk tools, which are critical for executing high-volume blocks of trades and optimizing capital efficiency. Features like cross-margin systems, funding rate arbitrage and application programming interface (API)-driven execution appeal to quant-driven strategies.
That said, institutional interest in decentralized platforms is also rising. Some DeFi-native firms and algorithmic traders use DEXs to tap into on-chain liquidity and programmable yield strategies. While regulatory uncertainty and transparency risks temper broader adoption, the growth of hybrid platforms enables institutions to blend privacy and composability with compliance and control.
Institutional interest, especially DeFi derivatives, grew notably with decentralized autonomous organizations (DAOs) beginning to use derivatives for treasury management. Some DAOs use perpetual futures contracts to hedge against market volatility and to help ensure the stability of their treasuries. The growth of stablecoins is helping bridge crypto with global finance.
Derivatives User Base to Grow as Tools Expand
With growing market maturity and capital efficiency, crypto derivatives are playing a key role in the convergence of digital and traditional finance.
Looking ahead, crypto derivatives are entering a phase of consolidation and vertical expansion, Chen said. “In the first half of 2025, open interest and liquidations reached record levels, particularly as Bitcoin’s dominance solidified and options markets matured. Even amid macro uncertainty, derivatives have held strong. Going forward, we expect sustained growth, not only in perps but also in tailored instruments like institutional-grade options, G10-denominated futures, structured products, and tokenized derivatives.”
The next stage of evolution in crypto derivatives is likely to be shaped by artificial. intelligence (AI). AI-driven trading platforms are emerging to automate strategy selection, risk management and portfolio optimization — giving institutional and retail users an edge in increasingly complex markets.
Meanwhile, cross-chain derivatives settlements powered by interoperability protocols like LayerZero or Axelar could break down current silos, enabling margin and collateral to flow seamlessly across ecosystems.
Regulatory developments are also likely to support adoption. While the U.S. CFTC regulates derivatives trading, especially for institutional players, decentralized platforms operate in regulatory gray areas. Jurisdictions like Singapore and the EU are setting frameworks to encourage innovation while ensuring consumer protection.
“Regulatory clarity in major markets and rising demand from asset managers will elevate derivatives from a trading tool to a broader investment utility,” Chen added.
The Bottom Line
Derivatives have transformed the way participants interact with crypto assets. From basic hedging to sophisticated trading strategies, derivatives now represent a significant part of the crypto economy. As markets evolve and regulatory clarity expands, futures, perpetuals, and options contracts will become more integral to portfolio management, liquidity provision, and financial innovation.
The next phase of growth will likely involve tighter integration between centralized finance and DeFi. As tokenized real-world assets (RWAs) gain traction, expect more hybrid derivatives blending on-chain assets with traditional financial instruments, pushing the crypto derivatives market deeper into mainstream finance.
FAQs
Crypto derivatives are financial contracts that derive their value from an underlying cryptocurrency like Bitcoin or Ethereum. Traders use them to speculate on price movements or hedge exposure without owning the actual asset.
Global crypto derivative volumes are approaching an estimated $10 trillion in 2025.
Perpetual futures have no expiry date, giving traders flexibility to hold positions indefinitely. Their popularity is fueled by high liquidity, leverage, and growing institutional interest.
Decentralized derivatives operate through smart contracts, allowing self-custody and full on-chain transparency. In contrast, centralized platforms manage user funds and execution with less transparency but simpler user interfaces.
References
- State of Crypto Perpetuals 2024 (Coingecko)
- The Crypto Derivatives Shake-Up (Google Drive)
- Buy Bitcoin & cryptocurrency (Bitcoin)
