2020 Q3 Cryptocurrency Derivatives Exchange Industry Research Report

Oct 2020

Find, Create, and Spread Value in Blockchain.TokenInsight.com bd@tokeninsight.com

TokenInsight Research research@tokeninsight.com

RESEARCH

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INDUSTRY VOICE

Personally, I am optimistic about the market. Although volatility is difficult to predict, the approaching election and major events such as the COVID-19 may increase market volatility. The contract market itself is more sensitive to volatility, which in turn will increase transaction volume.

Lin Head of Asian Business

The DeFi boom gradually receded in the third quarter, and top cryptocurrencies began to lead the market. As more and more institutional investors join and the overall professionalism increases, the contract market will grow to a certain extent.

Jay Hao CEO

The delivery contract has various holding period, and has a larger spread compared with the spot, which represents the market's view of the future price. Positions of perpetual contracts can be held for a long time without considering settlement date. Delivery, perpetual, and Options are important steps in the product innovation strategy of Huobi Contract.

Livio Weng Huobi Global CEO

Both spot and contract are an indispensable part of the entire market ecosystem. The advantages of the contract are very obvious. When the market is lack of volatile, users can use contract to gain greater profits. Spot and contract are complementary to each other.

Yi He Co-founder & CMO

James Ju Founder & CEO

For the contract market, if an exchange has enough retail users, then it will have better market liquidity and depth, and it will be more friendly to the institutions. Under this circumstance, the institutional trading strategy can truly face the retails trading users and be more effective.

The market performance this year is average. It is worth paying attention on whether the exchanges seize opportunities in the competition. The point is whether the interests of users is secured, whether the exchanges are providing good products for users. This is an ongoing thing. Only by doing well can we take the lead during development.

Maggie VP

At present, the world is still under the envelope of the epidemic, and from the perspective of the overall economic environment or national regulatory attitudes, investors may not prefer high risk investments, and the industry will not have explosive growth at present.

Jenny Zhang CMO

Ove

rview

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The derivatives market in 2020Q3 is slightly deserted due to the ‘Craze’ of DeFi, but in fact, the trading volume of derivatives is still growing. The trading volume in Q3 increased by 25% compared with the previous quarter. In addition to futures contracts, the Options market also shined in the third quarter. New exchanges focusing on Options trading such as bit.com, bitwell, and DEX have also been launched.

In terms of futures contracts, we have seen two phenomena: First, the underlying trading choice of the top exchanges have become more complete, basically covering the USDT-margined and Coin-margined(Inverse) contracts of mainstream assets. The differentiation of competition is gradually decreasing. We can foresee that in Q4 and the longer-term future, direct competition due to the reduction of product differentiation will be more intense; the second phenomenon is that for the hotter areas (especially DeFi projects ), its futures contract transactions will be launched in a relatively short period, and the categories and asset classes are becoming more complete.

In terms of DEX, which is different from spot trading, can bring potentially huge wealth effects. Derivatives DEX is relatively scarce at this point. There may be a huge gap between the underlying assets of spot DEX and centralized exchanges. Because a new token project can be listed on DEX ahead of the centralized exchange. However, the trading assets of derivatives are not so diversified, and there is still no better solution for the liquidity of derivatives decentralized exchanges.

Another point worth paying attention to is compliance. The punishment of BitMEX and the increase in the trading volume of fully compliant derivatives exchanges have confirmed that traditional financial capital and institutional investors are increasingly interested in the digital asset market. The key factor for the start of BTC's future price growth.

For each exchange, due to its reasons, the market competition pattern is also being broken. Due to compliance issues, BitMEX has suffered serious losses of assets and users, and the market position of coin-margined perpetual contracts has been constantly threatened, and other exchanges have benefited from this. The delivery contract market where OKEx has been in the first echelon for a long time is also being seized by exchanges that later launch delivery contracts. Binance grew rapidly in Q3, and it surpassed Huobi in September; although it is still inferior to Huobi in Q3 overall trading volume, the market share and grabbing of the top exchanges deserve more attention.

Of course, we also brought TokenInsight's third-quarter update. Comprehensively liquidity ranking of exchanges through the exchanges' market data, open interest, trading volume, web traffic, the distribution pattern of those data, and API trading support.

Now you can go on to the official website of TokenInsight to view real-time secondary market data of different exchanges, and different cryptocurrencies anytime and anywhere. For more information on the derivatives market in the third quarter, Please Enjoy the Report.

Wayne, TokenInsight COO

wayne@tokeninsight.com

2020.10.29

Co

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Executive Summary 5

Industry Updates 6

Industry Landscape 7

Trading 8

Market Volume Dynamics

Open Interest

Exchange Analysis 11

Overall Comparison

“100B Club”

Exchange Classification

Derivatives Exchange

Comprehensive Exchange

Compliant Exchange

Decentralized Exchange

Products Overview 20

Users and Popularity 23

Regulation 25

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30%

In the third quarter of 2020, the market-wide open interest increased

by 30%, 81% lower than the

second quarter (111%). Market open interest and trading volume increase together.

ElasticThe trading volume of derivatives continues to rise, and the year-to-date growth rate is 4.35 times that of the spot market year-to-date,

with higher flexibility. At

the same time, the exchanges continue to enrich products and functions.

In the third quarter of 2020, TokenInsight obtained data from 42 exchanges in the derivatives industry. The transaction volume of the digital asset derivatives market reported

$2.7 trillion, an increase of 25.1%

from the previous quarter, and a year-on-year increase of 159.4% from the third quarter of 2019.

TBDThe popularity of derivatives trading on decentralized exchanges gradually declined in August and September, and its trading volume was affected by the overall derivatives market. The trading volume of dYdX contract products accounted for 6% of its total trading volume when it was launched, and the actual market demand for decentralized exchange contract products in the short term

needs to be determined.

EXECUTIVE SUMMARY

NewPlayer

New players such as Huobi Futures, Bit.com and Bitwell entered the Options market, enriching the product range.

ComplianceThis quarter, the proportion of

transactions on compliant exchanges increased to 1.39%,

and the transaction volume of compliant derivatives increased by 73.3%.

PerpetualDerivatives exchanges still count on perpetual contracts as their main business, and the growth of trading volume on top derivatives exchanges is not as good as the market average. Industry competition has led to a decrease in the concentration of trading volume distribution.

The derivatives/spot trading volume ratio of comprehensive exchanges dropped to 2.1 from 4.4 in the previous quarter. The expansion of the spot business and the competition in the derivatives industry led to a decline in the proportion of derivatives transactions in this quarter.

2.1X

In September, the trading volume and the market open interest fell together. The withdrawal of funds may be a precursor to subsequent market changes. Investors should

control their risks.

Risk

$2.7trillion

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① Huobi Perpetual Contract is connected to Huobi Cloud;

② Matrixport launched its own derivatives exchange bit.com;

③ Digital asset exchange FTX launched AMPL futures and spot trading;

④ BitZ launched the PAXG contract to anchor the London bullion market, with a maximum leverage of 400x;

⑤ ErisX, a digital asset derivatives exchange, joined the Silvergate trading network;

⑥ KuCoin has added LUNA and VET asset leverage trading services, supporting 10x leverage;

⑦ The $1.2 billion bitcoin futures and Options contract expires on July 31;

⑧ The UK financial regulator has agreed to Kraken’s subsidiary, Crypto Facility, to operate its derivatives platform;

① Bingbon, the derivatives exchange, launched DOTUSDT standard contract trading;

② The listing on the INX Exchange has completed the regulatory requirements for raising US$7.5 million in legal tender, and has begun to accept digital assets;

③ Huobi Global Station established a "Global Observation Area" and launched the first batch of projects YFII and YFI;

④ Coinbase announced that Marc Andreessen, a partner of the American venture capital firm a16z, and Gokul Rajaram, an executive of Door Dash, have joined the Coinbase board of directors;

⑤ Two managers of the South Korean exchange Komid were sentenced to imprisonment on suspicion of fraud and embezzlement of 25 million US dollars;

⑥ South Korea’s third largest digital asset exchange, Coinbit, was seized and investigated by South Korean police for allegedly inflating trading volume and manipulating market prices;

⑦ Coincheck, a digital asset exchange under the Monex Group, announced the launch of Japan’s first IEO in cooperation with Hashpalette;

⑧ BitZ has launched three types of perpetual contracts: ATOM, LINK and DOT;

⑨ Coinbase released the ERC-20 standard token listing security review guide;

① Huobi launched an option contract, the industry's first USDT standard forward option contract;

② Huobi USDT/USD perpetual contract is officially launched, supporting multiples of 1x-1000x;

③ The total transaction volume of bitcoin Options on bit.com exceeds USD 360 million, second only to Deribit and CME;

④ Bitfinex launched traditional stock index derivative contracts settled by USDT, providing 100 times leverage;

⑤ BitZ has launched four DeFi currency contracts: SUN, SUSHI, YFI and UNI;

⑥ Binance launched USDT-priced DeFi composite index trading contract.Sept

INDUSTRY UPDATE

July

Aug

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INDUSTRY LANDSCAPE

DEX

S p o t D e r i v a t i v e

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1. Market Trading Volume

The derivatives market achieved a breakthrough this quarter, with total trading volume increasing to $2.7 trillion, and for the first time a single-day trading volume that exceeded the spot market

In this quarter, TokenInsight obtained data from 42 exchanges in the cryptocurrency derivatives market and carried out detailed research using the classification of derivatives exchanges in the previous quarter.

In the third quarter of 2020, the trading volume of the cryptocurrency derivatives market reported $2.7 trillion, an increase of 25.1% from the previous quarter, and a year-on-year increase of 159.4% from the third quarter of 2019.

‣ Cryptocurrency derivatives trading volume Source: TokenInsight

TRADING

$1,400B

$2,800B

2019Q3 2019Q4 2020Q1 2020Q2 2020Q3

Change�in�Total�Volume Total�Volume

$2,700B$2,159B$2,105B

$939B$1,041B

‣ Spot trading volume Source: TokenInsight

40.32%

59.68%

20Q3Spot�Volume20Q3Derivative�Volume

The total trading volume of cryptocurrency derivatives in this quarter was approximately 40.32% of the total volume (Spot & Derivatives), an increase of 12.92% compared with the previous quarter, accounting for 67.55% of the total market spot transaction volume. Consistent with the expectations in the TokenInsight second-quarter report, the third quarter derivatives trading volume ushered in a breakthrough of over $2 trillion.

‣ 20Q3 Comparison of Spot and Derivative Volume Source: TokenInsight

20Q3

20Q2

20Q1

19Q4

19Q3

$3,500B $7,000B

$4,550B

$3,265B

$6,647B

$5,441B

$3,998B

During the same period, the total transaction volume of digital assets in the spot market is shown on the left. This quarter, the total spot market trading volume decreased by about 26.5% from the previous quarter and fell by 12.2% from the third quarter of 2019. Different from the downward trend in the spot trading market this year, the trading volume of derivatives continues to rise, and the year-to-date growth rate is 4.35 times that of the spot trading volume over the same period last year.

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The derivatives market fluctuated significantly this quarter, and the depressed market sentiment in June was fully ignited at the end of July

The average daily trading volume of the derivatives market in this quarter was $29.35B. The highest single-day volume occurred on July 28 and reported $70.8B, which was $10.5B higher than the peak of the previous quarter ($60.3B); while the lowest single-day transaction occurred in On July 19, it was reported at $9.3B, which was lower than the single-day low of the previous quarter ($11.7B).

‣ 20Q3 Derivatives and spot daily trading volume Source: TokenInsight

$3,000

$6,000

$9,000

$12,000

$15,000

$50B

$100B

$150B

7/1 7/29 8/26 9/24

Derivative�Volume Spot�Volume Bitcoin�Price

In this quarter, the standard deviation of the daily trading volume of derivatives in the whole market was 13, which was higher than Q2(7.92) and Q1(9.86). This shows that the volatility of the daily trading volume in Q3 has increased significantly. After ending the downturn in June, the depressed market sentiment led to a retaliatory rebound in derivatives at the end of July. The single-day volume even surpassed the spot trading twice on July 28 and August 2, successfully creating history.

At the same time, the correlation coefficient between the derivatives and the spot trading volume in this quarter is 0.6, which is similar to the previous quarter, showing a strong correlation between those.

However, it is worth noting that, similar to the spot market, the noise in the derivatives market has been severe for a long time. In the survey conducted by TokenInsight this quarter, there are many exchanges with abnormal trading volume and open interest, and the authenticity of the overall market data needs to be improved. Therefore, the data disclosed in this derivatives report should be used more as indicators for trend analysis. For a single exchange, the accuracy of transaction data should be questioned.

Correlation coefficient between derivative and spot trading volume: 0.60 (20Q2: 0.69)

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2. Open Interest

Open interest in this quarter maintains the upward trend of the previous quarter

In the third quarter of 2020, open interest rose from $5.55B at the beginning to $7.22B at the end, an increase of 30%. While it was 81% lower than the increase in the previous quarter (111%). In the last quarter, under the low market volatility, investors generally chose a longer holding period and waited for opportunities brought by price fluctuations. In this quarter, the market's open interest and trading volume increased together, showing the frequent pass by of short-term funds and the continuous accumulation of long and short energy. Investors' willingness to trade increased this quarter, but they still have doubts about the direction of market outlook price fluctuations, leading to an escalation of the confrontation between long and short funds.

‣ 20Q3 Comparison of market-wide open interest and TI Index Source: TokenInsight

275

550

825

1100

$2B

$5B

$7B

$10B

$12B

7/1 7/31 8/30 9/29

Open�interest(Left) TI�Index(Right)

This quarter, the market open interest and TI Index showed the same trend. The rise in the price of Bitcoin at the end of July drove the market, resulting in a 63.5% increase in trading volume in August compared to July. After the shock in August, the price of Bitcoin fell in September, but still maintained a certain degree of volatility, resulting in a slight drop (-12%) in trading volume in September compared with August.

The increase in price volatility this quarter has brought profit to short-term investors. Compared with spot trading, derivatives have higher flexibility and can amplify market fluctuation. Once the market fluctuates, the volume of derivatives will change more than spot trading. At the same time, as the trading volume fell in September, the market open interest fell. The withdrawal of funds may be a precursor to subsequent market changes. Investors should remain vigilant and control risks.

July

Aug

Sept

$550B $1,100B

$954B

$1,084B

$663B

‣ 20Q3 month-wide market derivatives trading volume Source: TokenInsight

-20%

0%

20%

40%

60%

July Aug Sept

‣ 20Q3 monthly changes in open interest Source: TokenInsight

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1. Exchanges Comparison

The top three total trading volume exchanges in the derivatives’ volume fell to 48%. Competition has led to a decrease in the concentration of trading volume distribution

The total transactions volume of various derivatives exchanges is shown in the figure below. Among them, the trading volume of the top three exchanges accounted for 48%, and the trading volume of the top six exchanges accounted for 61%, down 13% and 22% respectively from the second quarter of 2020.

‣ 20Q3 The trading volume of various derivatives exchanges (excluding exchanges with abnormal trading volume) and market concentration Source: TokenInsight

EXCHANGE ANALYSIS

Huobi�Futures

Binance�(Futures)

OKEx�(Futures)

BitMEX

Bybit

BitZ

Hopex

FTX

Bitforex�(Futures)

Phemex�(Futures)

Deribit

CME�Bitcoin�Futures

MXC�(Futures)

Bit nex�(Futures)

Bibox�(Futures)

Kraken�(Futures)

ZBG�Futures

Delta�Exchange

Bakkt

Gate.io�(Futures)

$150B $300B $450B $600B

$3.1B

$3.9B

$4.5B

$5.0B

$6.2B

$7.2B

$16.3B

$23.9B

$27.4B

$27.6B

$38.6B

$47.1B

$59.8B

$73.1B

$104.6B

$109.0B

$179.9B

$283.9B

$484.1B

$521.6B

Others52%

Top348%

Others84%

Top316%

Derivatives

Spot

Note: BitZ, Hopex, Bitforex have not fully opened API trading

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Vol.

$521.6B

Vol.

$484.1B

Vol.

$283.9B

Vol.

$179.9B

Vol.

$109.0B

‣ Comparison of trading volume of the top six volume derivatives exchanges in 20Q3 Source: TokenInsight

During the same period, the top three spot exchanges’ transaction volume accounted for approximately 16%, which was one-third of that of the derivatives exchanges. Compared with the previous quarter (one-eighth), this proportion was significantly higher. The main reason is the intensified competition in the spot market this quarter. The top trading platforms with good fundamentals have stronger expansion capabilities in a volatile market environment. Meanwhile, derivatives’ growth potentials attracted exchanges to be here. The progress and diversification of products and services caused the increase in the diversification degree of transaction volume.

The following figure shows the top eight exchanges' trading volume compared with the total market trading volume:

‣Market share comparison of the top eight derivatives exchanges in 20Q3 & Q2 Source: TokenInsight

Among the eight, Binance's share in this quarter achieved better growth compared to the previous quarter, BitMEX has experienced a decline, and the share of other exchanges is basically the same as the previous quarter. Meanwhile, six exchanges’ volume, including Huobi Futures, Binance, OKEx, BitMEX, Bybit, and BitZ, has exceeded $100B this quarter.

3%

4%

3%

7%

14%

16%

23%

29%

Huobi�Futures Binance�Futures OKExBitMEX Bybit FTXHopex Bitforex BitZ

20Q220Q2

6%

4%

3%

6%

10%

16%

27%

29%

20Q3

68% 67%20Q2 20Q3Top�8 Top�8

Vol.

$104.61B

1BitZ� has� not� fully�opened�API�trading

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2. ”The 100B Club” The "100B Club" welcomed a new member this quarter, BitZ. The quarterly change rate in the trading volume of the top exchanges has changed significantly this year. In addition to Binance maintaining a relatively strong growth momentum in the second and third quarters, Huobi and OKEx reversed the negative growth of the previous quarter, with volume growth of 20.35% and 16.77% respectively, but still slightly lower than the average industry growth (25.1%) this quarter.

‣Quarterly change rate of trading volume of "100 Billion Club" Derivatives Exchange Source: TokenInsight

33%

67%

100%

1/1 2/8 3/17 4/24 6/1 7/10 8/17 9/24

Huobi�Futures Binance�Futures OKEx BitMEX Bybit

The expansion of Binance derivatives this year squeezed part of the OKEx’s and BitMEX’s market share. However, competition among the top exchanges eased slightly this quarter, with Huobi Futures, OKEx and Bybit all maintaining the same share as last quarter. Besides, BitZ launched multiple contract products this quarter, covering various DeFi such as SUN, SUSHI, YFI, etc., with a transaction volume of more than $100B.

‣Market share changes of the "100 Billion Club" derivatives in Q2 & Q3 Source: TokenInsight

-45.00%-30.00%-15.00%0.00%15.00%30.00%45.00%60.00%

Huobi Binance OKEx BitMEX Bybit

3.79%

-11.54%

16.77%

42.90%

20.35%

1.90%

-34.40%-41.70%

51.40%

-1.05%

Q2/Q1 Q3/Q2

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Class Standard Amount Exchanges

Large�Derivatives�Exchange

The�quarterly�transaction�of�derivatives�>�$50B;�Mainly�providing�derivatives�trading.�

3Bybit FTX�BitMEX

Large�Comprehensive�Exchange

The�quarterly�transaction�of�derivatives�>�$200B;�Providing�multiple�trading�such�as�spot,�derivatives,�and�OTC.

3Huobi�Futures Binance�Futures�OKEx

Compliant�Exchange

Holding�MTL�licenses�in�most�states�in�the�US,�or�being�regulated�by�the�FCA�in�the�UK.

3CME�Bakkt Kraken�Futures

Decentralized�Exchange

Exchanges�using�a�decentralized�trading�system.

1 dYdX

Other�Exchange 31 Others

3. Exchange Classification According to the characteristics of each exchange, the derivatives exchanges currently can be divided into the following categories. Large-scale comprehensive exchanges are developing in all aspects including spot, derivatives and OTC. Large-scale derivatives exchanges are fully developing contract transactions. Compliant exchanges focus on the construction of compliance systems. Decentralized exchanges’ derivatives marching was represented by the listing of BTC perpetual in dYdX.

‣ 20Q3 The classification standard of derivatives exchanges Source: TokenInsight

"The entire contract market has developed rapidly this quarter. Exchanges have opened DeFi-related contracts to give opportunities to carry out financial hedging operations to reduce risks. In the fourth quarter, mainstream digital assets’ bull market may come, as institutes aggressively purchasing them. The contract market will continue to grow exponentially as the trading market expands."

BitZ VP Maggie

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$1B

$2B

$3B

$0.65B

$1.19B

$1.96B

$0.52B

$1.15B

$2.24B

Q2 Q3

-12.5% 2.7% 24.9%

4. Large Derivatives Exchange

Perpetual contracts is the main business of large derivatives exchanges, and the growth of transaction volume this quarter is less than the market average

Taking the quarterly transaction exceeding $50B, and mainly providing derivatives trading as the standard, large derivatives exchanges include Bybit, FTX and BitMEX. They adopt a segments-market strategy specially serving professional derivatives traders. Only FTX has some spot transactions volume ($7.2B, accounting for 10.8% of its total trading volume). Meanwhile, perpetual contracts contributed most of the trading volume to large derivatives exchanges, of which Bybit does not provide delivery contracts.

‣ 20Q3 Daily trading volume of large derivatives exchanges Source: TokenInsight

$1,167M

$2,333M

$3,500M

$4,667M

$5,833M

$7,000M

7/1 8/1 9/1 9/30

BitMEX Bybit Hopex

The average daily volume of FTX in this quarter increased by 24.9%, compared with the previous quarter. However, the growth of Bybit's trading volume was much lower than the market average, while BitMEX's average daily trading volume continued declining (-12.5%). Large derivatives exchanges were impacted by the development of other types of exchanges' derivatives business during the quarter.

‣ Changes in 20Q2 and Q3 large derivatives exchange daily average volume Source: TokenInsight

‣ Perpetual and delivery contracts on large derivatives exchanges Source: TokenInsight

4.19%

95.81%PerpetualDelivery

BitMEX Bybit FTX

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5. Large Comprehensive Exchange

The average derivatives volume of large comprehensive exchanges was 2.1 times to their spot volume, and the gap between the top two exchanges narrowed

In this quarter, the ratio of large comprehensive exchange derivatives trading volume to spot trading volume dropped from 4.4 times to 2.1 times. Huobi Futures still ranked first in average daily trading volume, reaching $5.67B. The second-ranked Binance average daily trading volume ($5.26B) narrowed their gap from the 30% to 7.8%. The average daily trading volume of OKEx is $3.09B.

‣ 20Q3 daily trading volume of derivatives on large comprehensive exchanges Source: TokenInsight

$3B

$7B

$10B

$13B

$17B

$20B

7/1 8/1 9/1 9/30

Huobi�Futures Binance OKEx

The expansion advantages of large comprehensive exchanges in the spot business and competition in the derivatives industry led to a decline in the proportion of derivatives transactions in this quarter. Huobi Futures' derivatives trading volume is 3.06 times to the spot trading volume, accounting for 75.4% of its total trading volume. It is the largest proportion of derivatives business among large comprehensive exchanges. Binance and OKEx derivatives trading volume accounted for 61.2% and 63.9% of its total volume, respectively. Compared with the previous quarter, the ratio of the derivatives-total trading volume of the three dropped by over 10%.

Binance's average daily volume in this quarter rose 42.5% from the previous, far exceeding the market average (22.8%). The average daily volume growth of Huobi Futures and OKEx was lower than the market average, reaching 19% and 15.5%.

"Affected by DeFi, users have a wait-and-see sentiment. Large institutions have gradually held mainstream assets, and shall not use them to invest in other digital assets."

HBTC CEO James Ju

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‣ 20Q2-Q3 Change in large comprehensive exchange daily transaction volume Source: TokenInsight

$2B

$4B

$6B

$3.09B

$5.26B$5.67B

$2.67B

$3.69B

$4.76B

Q2 Q319.0% 42.5% 15.5%

In this quarter, Binance derivatives holdings increased from $600M at the beginning to $982M at the end, with a growth rate of 63.5%. Huobi Futures and OKEx derivatives holdings at the beginning of the quarter were $730M and $787M, respectively, higher than Binance's initial value. But the growth was only 13% and 12%.

It is worth noting that Binance's holdings fluctuated sharply during the end of August and the beginning of September. Large amount trading may cause this phenomenon. Meanwhile, when the market's open interest fell on September 25, Binance's open interest did not change significantly.

The gap between OKEx and Huobi's average daily holdings narrowed from 24% to 7% in the previous quarter. The large changes in the position reflect the fierce competition for funds among platforms in a certain extent.

‣ 20Q3 Large comprehensive exchange derivatives daily open interest Source: TokenInsight

$400M

$800M

$1,200M

$1,600M

$2,000M

$2,400M

7/1 8/1 9/1 9/30

Huobi�Futures Binance OKEx

Binance�Binance�Futures

20Q3Spot�Volume20Q2Derivative�Volume20Q3Change�in�Derivative�Volume

1.58x -1.49x

Huobi�Huobi�Futures

3.06x -4.2x

OKEx�OKEx�(Futures)

1.76x -1.17x

‣ 20Q2 - 20Q3 Ratio between derivative/spot transaction in large comprehensive exchange Source: TokenInsight

Huobi�Futures Binance OKEx

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6. Compliant Exchange

The transaction volume of some compliant exchanges has grown rapidly, increasing the proportion of the overall derivatives volume of compliant exchanges

Bakkt, CME, and Kraken Futures (Crypto Facilities) are the data-obtained compliant exchanges in this report. The three reported a total trading volume of $37.47B this quarter. Among the three, CME and Bakkt focus on the derivatives trading services. Kraken's spot business volume this quarter was $22.16B, which was $3.6 times to its derivatives volume.

‣ 20Q2-Q3�compliant�exchange�trading�volume�overview�Source: TokenInsight

In the third quarter, the transaction volume of derivatives on compliant exchanges increased by 73.3% (market average: 25.1%). Among them, Bakkt's transaction volume increased by 351.9%, and CME's growth volume was 80.6%, which also far exceeded the market average. Meanwhile, the market share of compliant exchanges achieved better expansion this quarter. The trading volume of derivatives increased from 1% to 1.39%.

 

"Currently, digital assets are facing two serious problems. OTC is a channel for money laundering. The second is that unregulated exchanges do not need to pay taxes. The domestic government pays attention to the outflow of fiat currency. This is an alarm for everyone. "

Hopex CMO Jenny Zhang

1.39%

98.61%

Others Compliant�Volume

$10B

$20B

$30B

$3.86B$6.24B

$27.37B

$0.85B

$5.61B

$15.16B

Q2 Q3

80.6% 11.3% 351.9%

CME Kraken Bakkt

‣ Percentage of trading volume on compliant exchanges in 20Q3 Source: TokenInsight

Although the digital asset derivatives compliance system is still at an early stage, data shows that there is a demand for compliance transactions focused on derivatives, and such exchanges have good potential. However, the improvement of the compliance system is affected by many factors.

"Digital asset contract transaction is just a drop of water in the ocean of investment. Its customers scale is still small. Exchanges can only ‘embrace the ocean’ by providing safe and streamlined products and improving customer’s trust degree. This is the direction Bitcoinwin strives for."

Bitcoinwin Founder

Michael Su

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7. Decentralized Exchange

The popularity of derivatives trading on decentralized exchanges gradually decreased in August and September, and its trading volume was affected by the overall derivatives market

The decentralized exchange dYdX launched the PBTC-USDC trading pair in June, and reported a trading volume of approximately $68.7M this quarter, accounting for approximately 0.0025% of the total market volume.

The dYdX’s trading volume in July increased by 14% month-on-month, while the whole derivatives volume increased by only 7% during the same period. However, the popularity of the product gradually faded in later months, and the proportion of transaction volume continued decreasing.

‣ dYdX contract trading volume and its ratio to the total market derivatives trading volume Source: TokenInsight

"Compared with the spot, of course the function of the contract is more powerful. The contract has one more time dimension than the spot. In the contract market, users can either go long or short.”

OKEx CEO Jay Hao

0.001%

0.003%

0.004%

$11M

$21M

$32M

June July Aug SeptIn addition, the trading volume of this contract product accounting for about 10% of dYdX's total volume this quarter, down 6% from when it was launched in June. The decentralized derivatives market is not yet mature, and its actual market demand needs to be considered. But at the same time, there are continuous decentralized exchanges in the industry to lay out derivatives, and DEXs that focus on providing contract transactions such as MCDEX and Injective Protocol have been launched one after another.

In addition, it is worth noting that the correlation coefficient between the dYdX contract and the whole derivatives volume is 0.71. This shows that for contract products launched by DEXs, their trading volume is more susceptible to the impact of the overall derivatives market.

9.96%90.04%

SpotContract

‣ dYdX Q3 transaction distribution Source: TokenInsight

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19.99%

80.01%

Perpetual Delivery

‣ 20Q3 Whole market perpetual contract and delivery contract volume comparison Source: TokenInsight

1. Contract Distribution

While the volume of perpetual continues growing, some exchanges focus on delivery

As shown in the figure on the left, the proportion of perpetual contract transactions rose to 80%. This figure was 39.1% in the first quarter of 2020 and 75.2% in the second quarter. This change shows that the focus of traders continues shifting from delivery to perpetual contracts.

Considering the different product strategies of each exchanges, TokenInsight took the five large exchanges with quarterly trading volume of more than $50B as examples, shows the composition of their derivatives trading volume. See the figure below for details.

‣ 20Q3 Large derivatives/comprehensive exchanges contract distribution Source: TokenInsight

PRODUCTS OVERVIEW

Huobi�Futures

Binance�Futures

OKEx

BitMEX

Bybit

FTX

$0B $120B $240B $360B $480B $600B

$4.4B

$10.2B

$197.8B

$21.1B

$267.9B

$55.4B

$109.0B

$169.8B

$86.1B

$463.1B

$253.7B

Perpetual�Volume Delivery�Volume

30.60%

69.40%

Perpetual Delivery

In this quarter, Huobi Futures perpetual volume increased from $125B to $254B, and the percentage of perpetual increased by 13.7%, making it the exchange with the largest increase in volume composition among large exchanges. OKEx's dominance of delivery contract volume also weakened, with the proportion falling by 4% this quarter. However, when exchanges generally shifted their focus to perpetual, Binance began to make efforts to delivery contracts. Binance delivery contracts increased 8.8 times this quarter. It can be seen that competition among large exchanges is fierce, and each exchange has actively deploying segments of the market.

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20Q25%

4%

10%

82% 20Q2

15%

4%16%

65%

BTCETHEOSOthers

20Q3

2. Dominant Contract

Affected by DeFi, the dominance of BTC contracts weakened. The trading volume of Ethereum and DeFi assets contracts increased significantly

In this quarter, BTC contract volume accounted for 65% of the total derivatives volume, a 17% decrease from the previous quarter. The volume of the three major contracts (that is, BTC, ETH and EOS) accounted for 85%, a decrease of 10% from the previous quarter. Due to the popularity of DeFi this quarter, the volume of Ethereum contracts increased significantly. Meanwhile, exchanges continue to launch DeFi contracts, and the increase in the diversity of the derivatives market has impacted on the proportion of Bitcoin contract transactions and weakened its dominant position.

‣ 20Q3 Dominant contract market share compared with Q2 Source: TokenInsight

"The digital asset industry is tracing the traditional financial industry, and will magnify it 2 times. It is very promising in all aspects but the risks are also great.”

BitMart Founder Sheldon Xia

“I expect there will be a great improvement in U-margin contract. Except for BTC and ETH, other cryptos will also increase."

Deribit Head of Asian Business

Lin

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3. Options Overview

New players come to the game, and the exchanges actively build the Options LEGO Kingdom

Following the launch of BTC American Options on Binance in the second quarter, Huobi Futures launched USDT margin Options and officially entered the Options market this quarter. Meanwhile, the derivatives trading platform Bit.com was launched this quarter. Its Options products had occupied 6% market share at the end of September. In general, the entrance of large exchanges shows Options market potential.

From a product perspective, the current Options market is still dominated by European Options. Options provided by different exchanges are different in design. In addition to the T-type quotation mechanism adopted by Deribit, OKEx, Huobi, etc., there are also inquiry mechanisms represented by FTX and ATM mechanisms represented by Binance.

Deribit's Options transaction volume accounted for more than 80% of the market this quarter, firmly occupying the top position in the Options market. Its daily trading volume can reach more than $45M.

In terms of holdings, at the end of September 2020, the open interest of Deribit's BTC Options once reached $1.7B. During the same period, the holdings of CME, OKEx, and bit.com reached $295M, $121M, and $105M, respectively. The four are the main players in the current Options market.

 

"I have a positive attitude towards the derivatives market. The trading volume will increase healthily, especially in the Options market. The reason is simple, because the existing volume in the Options market is limited. I think the Options volume can be about 50 times in the next 3 years. In addition, the fierce DeFi will cause new fluctuations in the market, and that will provide new opportunities."

Bit.com COO Daniel Yan

$0M

$400M

$800M

$1,200M

$1,600M

$2,000M

25-Jun 30-Sept

Deribit LedgerX Bakkt OKExCME

6%

3%

5%

85.8%

Deribit LedgerXBakkt OKExCME bit.comHuobi

BTC�Options�Volumes

‣ Comparison of open interest of BTC Options on exchanges Source: Skew, TokenInsight

‣ 20Q3 BTC Options trading volume of exchanges Source: Skew, TokenInsight, Data collection range is September 24th-September 30th

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1. Popularity

At the end of July, the searching for the keyword "Bitcoin Futures" reached the peak of this quarter, and the popularity in China remained the highest

This quarter TokenInsight surveyed on the popularity of cryptocurrency derivatives keywords to analyze the user search popularity in the derivatives market.

As shown in the figure below, taking the widely distributed keyword "Bitcoin Futures" in the search terms related to derivatives as an example, TokenInsight has obtained the popularity trend of this keyword in 20Q3: in the third quarter, "Bitcoin Futures" reached the peak of this season at the end of July 1 (100). Similarly, the popularity of "Bitcoin Derivatives" also peaked in late July. This phenomenon originated from the rise in Bitcoin prices during this period.

‣ 20Q3 Bitcoin Futures Google trend Source: Google Trend, TokenInsight

USERS AND POPULARITY

In terms of search sources, the top five countries/regions ranked by popularity are China (88), Cyprus (67), Singapore (60) and Lebanon (49).

‣ 20Q3 Bitcoin Futures Google trend map Source: Google Trend, TokenInsight

0

33

67

100

7/1� 7/16� 7/31� 8/15� 8/30� 9/14� 9/30�

Search�of�"Bitcoin�Futures"

1Peak value measurement: The trend value represents the searching times relative to the highest point in the specified area and time in the chart. The highest score is 100 points; 50 represents half of the searching times to the peak; if there is not enough data, it is 0.

‣ 20Q3 Bitcoin Futures Google Trend Distribution Map (Europe) Source: Google Trend; TokenInsight

‣ 20Q3Bitcoin Futures Google Heat Distribution Map (South Asia) Source: Google Trend; TokenInsight

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2. User Distribution

Binance's visit volume exceeded 100 million, and Huobi's visit volume doubled compared with the second quarter. BitMEX has obvious user advantages in the pure derivatives platform

Binance's visits1 exceeded 100 million, which was significantly higher than other derivatives exchanges. BitMEX's overall traffic this quarter is still in the leading among pure derivatives platforms, surpassing Bybit and Deribit approximately 218% and 1,053%, respectively. Meanwhile, Binance and Huobi derivatives platform traffics both increased compared with the previous quarter, and Huobi derivatives platform traffic rose nearly 120%.

‣ Statistics of traffics to online platforms of derivatives exchanges in 20Q3

Source: Similarweb; TokenInsight

According to Twitter data, in platforms that only provide derivatives trading, the rank of Twitter followers ranging from high to low is Bybit (91,000) and BitMEX (79,900) , Deribit (17,100), Hopex (1,557). While BitMEX and Bybit have a relatively large number of fans, their transaction volume also ranks among the top five in the industry. Although Hopex ranks in the top ten by volume, the number of fans is only about 1,500.

‣ 20Q3 derivatives exchange Twitter followers statistics Source: Twitter; TokenInsight

33K

67K

100K

BitMEX Bybit Hopex Deribit

Followers

17.1K1.557K

91K79.9K

1The comprehensive exchange traffic statistics are its derivatives platform, Futures has been omitted in the expression

BinanceBitMEXOKExHuobiBybitDeribit

24M 48M 72M 96M 120M

July Aug Sept

0.60M 1.20M 1.80M

‣ 20Q3 Derivatives exchange online platform traffics change compared with Q2 Source: Similarweb; TokenInsight

BinanceBitMEXOKExHuobiBybit

Deribit

-8%

24%

56%

88%

120%

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REGULATION DYNAMICS

LATEST DYNAMICS

• July 24, 2020, US regulators allowed banks to hold digital assets;

• On August 13, 2020, the Fed governor said that the Fed will continue to study CBDC (Central Bank Digital Currency) related opportunities and risks;

• September 15, 2020, the 49 U.S. states and the capital of Washington will unify the regulatory framework to simplify the compliance of digital assets;

• September 29, 2020, the US Securities and Exchange Commission (SEC) stated that it will not impose sanctions on digital security exchanges that comply with existing regulations;

• September 29, 2020, the Governor of California signed a law to bring more powers to the financial sector to regulate digital assets.

• July 31, 2020, Russian President Putin signed a law to regulate digital assets.

• July 10, 2020, the Anti-Money Laundering Financial Action Task Force (FATF) issued a review report on the implementation of revised standards for virtual currencies and their service providers on stable currency-related anti-money laundering and anti-terrorist financing issues.

• August 24, 2020, the UK regulator plans to extend financial crime reporting obligations to digital asset trading providers.

• August 19, 2020, several digital asset exchanges in Brazil signed a new self-regulatory code.

• South Korea promulgated the "Reporting and Use of Specific Financial Transaction Information Act" in June to amend the law to allow the application of AML and CFT rules to digital asset exchanges. On September 19, 2020, South Korea’s digital asset exchanges sought a “seamless” countermeasure. Money laundering solutions.

• September 15, 2020, the Securities and Exchange Commission of Nigeria issued regulatory guidelines for digital currency companies.

USA

Russia

FATF

UK

Brazil

Korea

Nigeria

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