A survey by Market Intelligence specialists, Acuiti, commissioned by Avelacom and Deribit, offers insights into how proprietary trading firms are approaching the cryptocurrency markets, both spot and derivatives.
The survey also explores how this differs between those firms created specifically to trade these assets vs firms entering these markets alongside their existing business trading “traditional” assets.
Proprietary trading firms have been early adopters of crypto derivatives:
81 per cent of those already trading crypto derivatives do so alongside the spot market.
Some 40 per cent began trading spot before moving onto derivatives, 32 per cent started with derivatives and 28 per cent began trading in both simultaneously.
Options are currently less popular than futures: 46 per cent are trading futures only (although just over half trade futures and options). However, 90 per cent of those not trading options are interested in doing so.
The number of markets being traded varied according to the type of proprietary firm and the trading strategies being employed, with traditional firms tending to trade on a higher number of exchanges than specialist firms (6 for futures and 2.6 for options for traditional vs 4.9 and 1.9 respectively for specialist firms), and firms using arbitrage strategies trading on more markets on average (6.9 for futures, with many trading across more than 10 venues).
The survey found a strong appetite for expansion among respondents with 97 per cent of firms planning to connect to more exchanges to trade crypto derivatives. All specialist trading firms were planning to increase the number of exchanges they traded on suggesting that they will soon narrow the gap between the number of exchanges they trade vs their traditional peers that was identified in the survey. The key drivers of connecting to new markets were to realise greater arbitrage opportunities, to interact with different market participants and to improve price discovery.