Amid global BTC rally, desi bourses try options
Synopsis
Bitcoin hits a new high, and Indian platforms introduce crypto options. This follows the launch of crypto futures. Traders are drawn to leverage and potential tax benefits. The crypto rally is boosted by hopes of US regulation. Volumes are still low compared to futures. Experts advise caution, highlighting the high-risk nature of crypto derivatives.
As the crypto queen Bitcoin crossed $120,000 to touch a new high in global markets, Indian players are trying their luck at ‘crypto options’.
After the launch of ‘perpetual crypto futures’ almost two years ago, at least two local crypto platforms are now offering cryptocurrency options with multiple expiry dates.
The element of leverage, the lure of making money by investing small amounts, and a possible escape from the high tax deducted at source on sale of virtual digital assets could be irresistible to some traders – like stock market punters attracted to equity derivatives despite the risks. The crypto rally, triggered by Donald Trump winning the United States presidency last year, received a boost this week with traders excited by the possibility of the US House of Representative debating Bills that could pave the way for a much-awaited regulatory framework for the virtual digital assets.
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TOP COIN SETSSmart Contract Tracker18.20% BuyNFT & Metaverse Tracker14.63% BuyDeFi Tracker14.54% BuyBTC 50 :: ETH 5012.37% BuyWeb3 Tracker8.48% BuyTOP COINS (₹) Ethereum324,121 (2.79%)BuyBNB65,741 (2.62%)BuyXRP300 (1.39%)BuyBitcoin10,220,376 (0.55%)BuyTether86 (0.19%)BuyBuoyed by the hope of a greater recognition and acceptability of cryptos in the largest financial market, Bitcoin (BTC) surged to a record high of $123,153 before pulling back to around $122,000.
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View Details »Volumes yet to take off
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BTC is up 60% since the US elections in November 2024. A bull market triggers new products, as borne out by the offering of crypto options in India. But these are early days. Unlike the futures, option volumes are yet to take off with traders still drawn towards the comparatively less complicated crypto futures which offers a leverage of at least ten times. However, some feel that options could slowly catch on as it has in the stock market.
“For instance, given the expectations that BTC could inch up, some traders are probably buying call options. But cryptos are a volatile market. So, while futures may be a simpler trade, the risk of the margins against a futures position getting liquidated in a sudden fall is always there. Unlike that, a trader having bought calls can still make money if there is a bounce back…Still, I feel options volumes will take a while to rise,” said an industry person.
Ashish Singhal, co-founder of CoinSwitch, which is one of the exchanges that has launched options, said, “Options have long been part of traditional finance, but in crypto, they’ve often remained complex and intimidating, sometimes even inaccessible. We’re trying to change that. We know options aren’t for everyone, they come with risk and require understanding. That’s why we’ve introduced thoughtful friction. For example, first-time users must pass a basic quiz before they can trade.” Another bourse which is offering crypto on BTC and Ether is Delta while a large exchange is expected to launch options soon.
The margin money for a futures trade as well as the premium to buy an option is paid in rupees by a trader, and a local exchange may source liquidity and borrow the prices from an overseas exchange where crypto derivative volumes are high. Many local platforms have accounts with large offshore platforms. Thus, if the local market does not have enough liquidity, a platform may act as an intermediary and do a mirror trade on the overseas platform.
According to Edul Patel CEO of another crypto exchange Mudrex, “India has a strong base of traders in the derivatives space, and that appetite is now extending into the crypto space. We’re seeing traditional traders also explore crypto derivatives, mainly because of features like no expiry contracts, smaller lot sizes, deep liquidity, and the ability to trade any time of day. At Mudrex, we have also seen people holding their positions for months. Interestingly, most trading activity is still aligned with US market hours, highlighting the global nature of crypto markets.
‘High-risk financial product’
“However, crypto derivatives are not for everyone. It is a high-risk financial product that needs skills and a strong understanding of the markets and does not fit everyone’s risk appetite,” he added.
