Crypto Derivatives: Everything You Need To Know

Crypto Derivatives

The term “crypto derivative” can refer to a few different things, but all of them have one thing in common: they’re financial instruments that are traded on the blockchain. It’s a simple enough concept, but it gets a little more complicated when you start looking into specifics.

Derivatives are financial products that get their value from underlying assets such as securities, commodities, or indices. They can be used to speculate on changes in prices of that underlying asset, or simply to hedge against them.

We will go over some of the most popular types and top crypto exchange where you can trade crypto derivatives.

What Is Crypto Derivatives

Crypto derivatives are financial assets that derive their value from underlying assets, in this case cryptocurrencies. These assets are usually traded on a centralized platform that allows you to buy and sell your assets like regular stocks.

Derivatives are known as financial instruments that have no intrinsic value or worth. They’re traded based on the value of an underlying asset. In the cryptocurrency realm, derivatives allow investors to speculate whether the price of a cryptocurrency will go up or down without having to own the underlying asset.

The most common cryptocurrency derivative is a stable coin, which is a coin pegged to another stable asset like gold or the US dollar. These coins are designed to prevent cryptocurrency market volatility and provide users with access to the benefits of blockchain technology without having to worry about the ups and downs of value. One of the most popular stable coins is USDT and its trading  pairs BTC USDT, APT USDT and more are also making its way to stardom.

Two Types Of Derivatives

There are two main types of derivatives: call options and put options.

  • A call option gives you the right to buy an asset at a certain price by a specific date. A call option on shares is a derivative contract; someone who holds a call option on shares has the right to buy those shares at a certain price for a certain period of time.
  • Put options give you the right to sell an asset at a certain price by a certain date. It is where you can also trade options where you don’t have the right to buy or sell anything, just speculate on how much the underlying asset might change in value and works similarly to short selling

Options are contracts that can be bought and sold before they expire, so they’re flexible based on market conditions, giving investors more opportunities with less capital risk than trading directly into cryptocurrencies or futures contracts.

What is Derivative Trading in Crypto?

Derivative trading is a form of trading that uses the value of an underlying asset as the basis for its value. It’s called “derivative” because it’s derived from another source, whether that be a stock, cryptocurrency, or even a physical good.

Derivative trading in crypto has been around since before crypto was even conceived—derivatives have been around for thousands of years, and are widely used in futures markets today. When you buy an option, you’re purchasing a derivative contract with its own unique value based on the price of an underlying asset at a certain time.

Crypto Derivative Market

A derivative market is the market for trading derivative contracts. It is one of the most common types of financial markets, and can be found in a wide variety of different forms. In cryptocurrency, it is mostly used for settling bets on future price movements.

Derivative market is a type of financial market where it allows for the trading of contracts that are tied to the price of another asset, called the underlying. The most common examples are those based on the price of stocks, bonds, or commodities.

A Bitcoin futures contract (for example) will allow you to buy or sell Bitcoins at a certain date in the future at a price that is determined today.

Popular Types Of Derivatives In Crypto


Futures are a type of derivative that can be used to hedge risk or speculate on the price direction of an underlying asset. Many times, futures are traded as a proxy for an asset that isn’t available for direct trading, and the contracts themselves can set a price for the asset in question.

In crypto, futures are most commonly used to hedge against price volatility. This is especially useful for traders who plan to hold onto their assets long-term and don’t want to be subject to swings in value.


This is a type of derivative that you could consider to be the base model of all others. An option is an agreement between two parties (the option buyer and the option seller, or “writer”), where the buyer has the right to buy something from the seller at a certain price within a certain timeframe, and the seller has agreed to sell it for that price if and when the buyer wants to exercise their right.

Perpetual Contracts

A perpetual contract is one that does not have an expiration date; the creator of the perpetual contract can set it up to last forever or as long as they want. This type of derivative is very popular because people like the idea of having complete control over it. They can increase their profits by raising interest rates, or they can just leave it alone and enjoy the steady stream of income their investments generate.


Swaps are a class of derivatives that allow two parties to exchange the cash flows of two different kinds of assets. The most popular kind of swap is a plain vanilla interest rate swap, in which two parties exchange streams of interest payments on two different types of debt.

In crypto, swaps can be used to exchange the cash flows on two different kinds of crypto assets, or they can be used to exchange the value of one cryptocurrency for another at an agreed upon price. Swaps are popular in crypto because they’re one of the only ways to hedge your holdings across currencies without actually having to take possession of both currencies.

Read More: 10 Significant Cryptocurrencies Other Than Bitcoin


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