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Author Topic: A Mature Cryptocurrency Derivatives Market  (Read 108 times)
ajimenez
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November 23, 2017, 08:29:53 PM
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When it comes to blockchain technology, 2017 has been a year of continuous experimentation and explosive growth. Cryptocurrency market capitalization has reached $200 billion USD - a tenfold increase over the $20 billion USD figure of the start of 2017 according to Coinmarketcap.

https://coinmarketcap.com/charts/
(The cryptocurrency market cap was $18 billion at the beginning of 2017. Data source: Coinmarketcap)

While the cryptocurrency market is at a remarkable size for such an early stage, it’s impossible to compare $200 billion with the multi-trillion USD market cap of more mature, “classical” markets such as equities, securities, or real estate.

Yet, if the cryptocurrency market continues to grow at its current exponential rate, the trillion-dollar benchmark may not be as far off as it seems. However, there are some considerable challenges facing cryptocurrency, before the market can begin to mature.
Problems facing the current cryptocurrency market
  • 1. Most investors’ portfolios are not adequately positioned.
  • 2. Most platforms do not support going short.
  • 3. The market is highly volatile. When the price goes down, the only way to hedge risks is to sell.
  • 4. Most investors are not familiar with leverage strategy.
  • 5. The market does not have a currency-weighted index.


As the market matures, current investors in the cryptocurrency market will begin to search for low-risk asset distribution, while later investors will be willing to take on higher risk in exchange for greater rewards. This is the perfect opportunity to address the needs of different types of investors.

Financial derivatives are the answer to the crypto markets’ growing and diversifying investment needs. While electronically traded derivatives have existed for decades in the “traditional” financial markets, there is a clear need and high market potential for derivatives in the cryptocurrency markets. On the cryptocurrency platform, derivatives can serve the needs of investors looking for both low-risk and high-risk asset distribution. With these new structured cryptocurrency products, investors can assess and implement the best allocation of their assets and take risks that they deem reasonable. As the market matures thanks to the risk-mitigating opportunities of derivatives, cryptocurrency will become its own asset class for future wealth.

The Olympus Labs team is comprised of industry experts with extensive experience in the traditional financial market and in blockchain development. This expertise has the Olympus team perfectly positioned to provide the blockchain market with mature and feasible derivative products built on stable and efficient smart contracts.

For those who are unfamiliar with the derivatives market, the following hypothetical may help to explain these offerings:


  • Tom is large-scale Bitcoin miner. He has mined a significant amount of Bitcoin in a favorable market conditions, even after deducting the costs of mining. However, if Tom does not sell the Bitcoin, those coins are merely numbers in his wallet, enslaved to market volatility. If the price of the coin goes down, Tom is forced to endure that depreciation. Even if the market goes up, the threat of unfavorable market conditions will always exist. Currently, there are very few options for Tom to hedge his risk.
  • An ideal product for a Bitcoin miner like Tom would be one that allows him to loan out his hard-earned bitcoin in exchange for promised interest. This way, he has guaranteed income from interest, and his borrowers can invest these the loaned coins to make short-term profits.


These products are the so-called financial derivatives that can hedge against market risk and extreme volatility of cryptocurrency prices.

The above example is just one way of many potential financial derivatives that can be developed. The current cryptocurrency market is a single spot market. To the vast majority of investors, waiting for the price increase is the only way to gain profits; this singular way of asset allocation is not enough.

The singularity of investment opportunity reveals that the cryptocurrency market is far from mature due to the the lack of widespread introduction of derivatives. When investment funds turn their attention to the cryptocurrency market, large amounts of assets will enter the market and those who are the first to develop the derivatives products and tools will hold the most advantageous position in the market.

tl;dr
If investors look to further increase blockchain technology, they will require the development of cryptocurrency-based derivative products and tools to do so. This is the future of cryptocurrency and the vision of Olympus.

https://olympuslabs.io/

https://medium.com/olympuslabsbc/conquer-cryptocurrency-volatility-with-olympus-b92201ccae53
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November 24, 2017, 02:34:21 AM
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