As someone who has spent the better part of two decades designing and running derivatives venues and products, I’ve watched the crypto market replay—at double speed—the evolutionary steps that reshaped equities and fixed-income in the 1990s and 2000s. Derivative turnover now eclipses spot activity, and open interest in crypto futures and is beginning to rival that of smaller contracts in traditional markets. Healthy option flows are spawning a new generation of capital-protected products. Mapping this suddenly complex landscape not only explains the recent flurry of M&A activity in the crypto-derivatives space; it also gives investors and product managers who still anchor on spot volumes the perspective they need. Robust derivative infrastructure, after all, is the prerequisite for any asset class that aspires to institutional scale.
Pull up the market‐depth screen on your favourite crypto trading platform and something should immediately jump out: the heaviest trading in crypto assets no longer happens in the spot market. In March last year, combined spot and derivative turnover on centralised exchanges soared to an all-time-high US $9.12 trillion—but fully two-thirds of that volume came from futures, options and other synthetic instruments, not from spot coin pairs trading. By May 2025, notional open interest in perpetual and traditional futures on BTC and ETH alone regularly outstrips the volume of the respective underlying spot markets. Although the activity is presently concentrated into two leading product categories, futures and options, other products are growing at a fast rate too and the whole crypto derivatives ecosystem is growing organically into a fully-fledged “crypto derivatives stack”.
Why does that matter? Because as in other asset classes, derivatives are where price, risk and capital efficiency meet and function as price-discovery accelerators, risk-transfer medium, capital-efficiency gateway and innovation flywheel.
In short, derivatives are acting as a glue across the crypto spectrum, making it possible for very different pools of capital to interact and coexist around the same asset class.
What are the benefits of the different layers of the stack and how do they relate to each other?
1. Delta-1 Perpetual Futures – 24/7 liquidity
Aggregate open interest in non-expiring futures across major crypto venues reached an all-time high in May 2025. With no expiry, 50–100× leverage and four- to eight-hour funding resets, these contracts—known as “perps”—offer razor-thin spreads and constant basis-arbitrage against spot or listed futures, making them the centre of intraday price discovery. Because they trade on dedicated crypto exchanges that bypass complex clearing arrangements, perps provide a straightforward way to obtain leveraged exposure to the most popular pairs. The launch last week of retail-accessible perpetual futures with more moderate leverage on the MiFID-regulated venue, One Trading confirms that appetite for delta-one leverage extends well beyond institutional desks and remains unmet by traditional centrally cleared contracts.
2. Standardized Exchange Traded Cash-Settled Futures – the institutional bridge
CME Group Crypto report bitcoin futures open interest just above US $16 billion and average-daily notional turnover near US $11 billion in Q1-2025. Acceptance of a traditional range of collateral, CFTC oversight and rich cash-and-carry spread have turned these contracts into the hedge and basis leg of choice for macro funds and ETF market-makers.
3. Exchange-Listed Options – key to volatility dynamics
Total bitcoin option open interest on the dominant venues remains near record highs, demonstrating the market’s capacity to absorb expiries of up to US $12 billion in notional value without disrupting the underlying spot market. Although crypto options account for only a mid-single-digit share of overall derivatives volume, observable shifts in put-call skew and term structure are information-rich, offering traders early clues about changing volatility regimes. Alongside exchange contracts, a deep and liquid OTC options market operates in parallel, smoothing kinks in the volatility surface, supplying strike-specific liquidity, and enabling efficient pricing of path-dependent “exotics.”
4. Capital-Protected Structured Notes – access to defined outcomes
Structured notes translate the option layer into wealth-manager language. Structures that wrap bitcoin exposure with principal protection are gaining popularity to achieve controlled risk exposure and diversify traditional portfolios maintaining very strict limits on potential losses. By externalising tail risk to volatility sellers, these wrappers let cautious allocators to dip a toe in, while keeping compliance officers happy. Moreover, the OTC market for exotic options is becoming more liquid allowing issuers to go beyond Participation and Fixed-Coupon notes and into offering more aggressive pay-out profiles with Shark Fin or Binary notes.
How the layers interlock
Perpetual swaps sit at the base of the stack. High-frequency traders, proprietary market-making desks and market-neutral funds gravitate to these non-expiring contracts because they offer millisecond execution, 50x-plus leverage and continuous funding-rate arbitrage opportunities. In practice, that combination makes perps the real-time price engine for all other instruments: every dislocation in spot or listed futures is first exposed – and usually neutralised – in the perpetual books.
An overlapping layer is represented by cash-settled traditional futures traded on regulated venues like CME. Leveraged buy and hold and directional funds use them for synthetic exposure, ETF authorised participants and dedicated basis desks hold positions because of the minimal balance-sheet drag. Accepting Treasuries as collateral, they allow participants to run delta-neutral carry trades (or outright hedges) without moving capital onto offshore exchanges, marrying regulatory clarity with capital efficiency.
Options form the third layer. Volatility specialists and quantitative funds use these markets to build non-linear pay-offs or monetise implied volatility. Whether it is buying deep-out-of-the-money calls for asymmetric upside, or running systematic short-gamma strategies for yield, options provide the exposures that neither futures nor spot can deliver. The liquidity they generate through hedging activity, in turn, feeds back into the delta-one markets via delta-hedging flows.
At the top sit principal-protected notes favoured by wealth managers overseeing HNWI and private money. By embedding structured option spreads inside a note or fund, issuers deliver a pre-agreed downside floor and a capped upside. For allocators barred from leverage or offshore venues, these wrappers provide a risk-controlled gateway into crypto while routing the residual market risk back into the lower layers of the stack.
The stack works because each layer solves a different problem while supplying liquidity to the next. Take away perps and the reference price wobbles; shrink options and the structured-product market dies; curb futures and the ETF arbitrage pipeline stalls. For investment committees, product managers and traders, that means instrument choice should map directly to objective: raw beta from perps, hedged basis from futures, asymmetric pay-offs from options, and capital-preservation via principal guaranteed notes. Understand the dependencies, and crypto derivatives become a toolkit—not a gamble—for portfolio construction.