Crypto is Ready for Onchain Options | Nick Forster, CEO of Derive
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Why have crypto options lagged behind perpetual swaps?
Bankless Nation, I'm here with Nick Forster. He's the co-founder and CEO of Derive. Derive is the largest on-chain options exchange on Ethereum. Nick, welcome to the show. Hey David, thanks for having me on. Nick, I want to kind of get to just some very basic questions about crypto and options. Mainly, options really haven't come online in the crypto sense in ways that the perpetual has or in ways that if we extrapolated to from how much TradFi loves options, they don't the options in crypto don't really meet that level of popularity in the in the crypto industry. And I I want to know why. Like why haven't options grown as large in crypto as we would have otherwise expected?
Yeah, it's a great question. I think to some extent it's the natural evolution of all financial markets. Options are always the last vertical to mature. You kind of need to anchor the market, like some of these bigger, slower moving institutional players um really trying to earn yield on their assets, whether it's equities in the equity market, um, or in crypto, like on Bitcoin and ETH, or you need structural hedgers. So things like Um, you know, airlines head hedging their jet fuel costs or um, you know, farmers hedging the the sort of price of their crop before harvest. Like those are the big repeat flows that just take a while to emerge in a new industry, a new asset class. And for options, you know, in crypto, speculation is dominated and options are good for speculation, but to really serve that use case, they need those guys in you know, in the market, selling options, creating.
Creating a competitive two way marketplace first. I mean, it's just taken a long time for that to happen, but now it really is starting to accelerate. And what options do really well, and it's a criticism people give them often is like there are just so many of them. There's so many choices and different strikes and expiries. And it's like kind of the point. It's the same reason prediction markets are beginning to take off. They give you this level of control and granularity and ability to express lots of different opinions about the market. And when typically you can do that in a more precise and defined way. You can make more money on your trading opinion when you're correct. So um I expect options to continue.
They've started to really grow as a market share in crypto. I expect that to really um you know kick on over the next couple of years.
So the your answer is that really there needs to be a pretty rich diversity of market participants in order for the options markets to grow. And maybe that stands in contrast to the perpetual as an instrument, where really you just need two market participants. You need people to LP, you need people to lend to the people going long or short, and then you need people going long or short. And the simplicity is maybe what allowed the perpetual. To grow so fast. Options, on the other hand, has a a wider variety of a need of different participants doing different things to create the double coincidence of wants and a lot of them in order for the options market to really uh manifest. Is that is that correct?
Yeah, that's uh that's really, really well said. Um and I think to date in crypto, again, if you think about the assets that have been popular or available in the market, you know, we've got this new recent wave of tokenized equities and commodities that's bringing like big useful assets on chain. But to date, we've had Bitcoin, Ethereum, maybe a couple other coins, but a lot of the coins that have done perp trading, those, you know, meme coins or whatever it is, they Last for two or three weeks before people move on to the next thing. And this is not enough time for that market and that coincidence and once to develop. But now, as I said, you've got this, you know, more and more high quality crypto tokens that are emerging with longer term, more sophisticated holder bases.
Like hype is kind of the most recent one that's had a breakout options market over the last year for that reason.
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Chapters
8 chapters
1
Why have crypto options lagged behind perpetual swaps?
0:03–6:25
2
What did the October 10 crash reveal about leveraged trading risks?
6:25–11:54
3
How do options differ from perps in terms of risk and payoff?
11:54–17:29
4
What is the current size and economics of the on‑chain options market?
17:29–22:37
5
How is Derive’s HYPE strategy reshaping liquidity for new assets?
22:37–28:05
6
Why does on‑chain architecture matter for options trading?
28:05–34:36
7
What upgrades does Derive V3 bring to margin and composability?
34:36–40:10
8
How can on‑chain options unlock new yield and hedging use‑cases?
40:10–45:19
Speakers
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