The crypto OTC market is hot, and the options market helps institutions to avoid risks

Many cryptocurrency trading companies have stated that the results of the US election and the recent rise in cryptocurrency prices have led to a rapid increase in over-the-counter (OTC) trading volume over the past few months, and customers have also started to pay more attention to Altcoins beyond Bit and Eth. In addition, as institutions place great emphasis on liquidity, the emergence of options and other markets has significantly improved their hedging efficiency.

OTC Trading Sees Significant Growth

According to The Block, Kraken's institutional desk head Tim Ogilvie said that OTC trading is currently in full swing. Kraken's OTC trading volume has increased by 220% year-on-year, and other cryptocurrency trading companies have also seen similar growth.

Jake Ostrovskis, an OTC trader at market maker Wintermute, said that Wintermute has been in discussions with some clients for years, and market participants hope to be well-prepared, and this election has played a critical role in the final decision.

Ebert Lin, a trader at another market maker GSR, said that with the rise of Bit, Eth and Altcoins, projects and investors have become more proactive in managing their funds and risks. Institutions and other organizations are also looking for new opportunities and ways to engage beyond Bit and Eth.

Institutions Focus on Liquidity, Options Market Helps Hedging

Market makers also pointed out that clients are also starting to move further along the risk curve and getting involved in more cryptocurrencies - as long as they have sufficient liquidity.

Ostrovskis listed the cryptocurrencies that Wintermute's clients are most concerned about besides Bit and Eth, including Solana, BNB, TRON and Aave, as they have the strongest liquidity, and naturally attract clients. Liquidity is the biggest driving force for institutions.

Ostrovskis also pointed out that as options are more widely used, the derivatives market is becoming increasingly mature. He said that large institutions exposed to cryptocurrencies need some form of hedging. Due to liquidity constraints, they may turn to OTC desks for quotes, and options are a key solution.

Most institutions will heavily rely on these products to hedge their underlying stock, bond or forex positions, and the launch of Bit ETF options has opened the door for major brokers to create cross-collateralized products, as the cost of assembling these products using just the underlying ETF is too high.

According to SoSoValue, the current open interest (OI) of the three Bit ETF options that have been issued, including BlackRock's IBIT, Grayscale's GBTC and BTC, totals $7.98 billion as of 12/23.