OPINION: Crypto markets - the giant shift on the horizon
19th February, 2025|Simon Forster, global co-head of digital assets at TP ICAP
In the history of financial markets there are few absolutes save the fact that the size of any derivatives market typically dwarfs that of the underlying asset. Crypto is no different.
Today, crypto liquidity is dominated by perpetual futures (“perps”), highly capital-efficient instruments that have flourished on offshore centralised exchanges, primarily serving retail traders. This dominance is set to be challenged in the years ahead as institutional adoption arrives en masse. This new wave of entrants brings a different set of expectations, prioritising regulatory certainty, brand familiarity and robust trading infrastructure. This means liquidity is shifting – and it won’t look the same in a few years.
Onshore vs offshore
Today, liquidity is already bifurcated between “native/offshore” exchanges - those catering to retail traders with crypto-native products - and “traditional/onshore” exchanges, which have historically served institutional clients across other asset classes and are now expanding into crypto derivatives. The traditional exchanges are better positioned to attract these new entrants, and we believe liquidity will follow – but we are not there yet.
But how will this shift impact global liquidity? Currently, offshore exchanges dominate crypto derivatives. The top five -Binance, BitGet, OKX, Bybit, and Gate.io - account for 80-85% of open interest and trading volume in crypto futures. However, traditional exchanges are gaining ground, and we believe this trend will accelerate.
Take CME Group’s Bitcoin futures contract - the largest institutional crypto futures market. In December 2024, CME accounted for 14% of total crypto futures volume, a relatively small but steadily growing share.
More importantly, CME’s Bitcoin contract is rising relative to equivalent derivatives in other asset classes. In Liquidnet’s Annual Global Futures Top 150, it came in at #102 in 2024 – moving up an astonishing 71 places in a year. Given its foothold due to existing connectivity and regulatory clarity, we believe their Bitcoin contract will become the most liquid globally and enter the top 50 in our Liquidnet survey within two years.
Growing footprint
On the listed options side, we see a more concentrated picture. Deribit dominates the market (with 73% market share in December). But that landscape is also changing.
In November 2024, the first equity options tied to BlackRock’s Spot Bitcoin (IBIT) exchange-traded fund (ETF) launched—and the impact was immediate. Within two months, open interest in IBIT options reached 50% of Deribit’s equivalent product, with a staggering 2.16 million contracts or $11bn (£8.7bn) in notional traded.
There are two key reasons behind this rapid growth:
Institutional access – Deribit remains unavailable to US investors while US-based ETF options trade within familiar regulatory frameworks.
Equity market integration – IBIT options settle through traditional equity infrastructure, making them instantly accessible to a much broader range of investors.
This shift is significant. We are now seeing institutional volatility, delta-1, and financing strategies executed via ETF options, bringing new trading participants into the market.
What comes next?
Looking further out, a new class of derivatives marketplaces is emerging - primarily non-retail and regulation-focused, aiming to offer the “best of both worlds”: the clarity of traditional providers with a crypto-friendly model. New exchanges, multilateral trading facilities (MTFs), and organised trading facilities (OTFs) are competing to shape this evolving landscape. With perps dominating native exchanges, many are exploring how to adapt these products for traditional markets.
In addition, we believe the over-the-counter (OTC) derivatives market is primed to develop - driven primarily by the shift in the US. As banks become more active an embryonic interdealer broker (IDB) market may well evolve offering liquidity in Non-Deliverable Options and Forwards. Being able to trade on an OTC or listed basis provides firms with optionality; OTC products provide more customisation, create bilateral credit risk and provide a higher level of discretion – factors that shape how institutions trade.
Whilst liquidity over the last decade has primarily been on the native exchanges serving retail activity, that is now shifting, and quickly. The focus on traditional providers, better suited to the requirements of the world’s largest institutional participants will only compound and we will see global liquidity come to be dominated by traditional providers and their products in the years ahead.
Data derived from:
