The United states Bitcoin (BTC) derivatives market witnessed a slew of developments in 2022 every bit "old players" set trading volume records and "new players" introduced novel market products. After months of regulatory maneuvering, Bakkt finally launched and has gone on to post tape Bitcoin futures trading volumes.

Several platforms have likewise obtained Swap Execution Facility licenses from the U.S. Commodity Futures Trading Committee as the crypto derivatives arena in the country expanded throughout 2022. Ane of the 19 CFTC-licensed platforms, Tassat, said the approving is a preliminary step to the company listing physically settled Bitcoin derivatives for institutional clients.

Overall, 2022 saw the emergence of the Bitcoin derivatives market transitioning from a corner of the broader crypto trading landscape to taking a more than significant place within the industry as a whole. With the U.S. Securities and Exchange Commission refusing to approve whatsoever Bitcoin exchange-traded funds, Bitcoin derivatives seen to have become a house favorite for institutional crypto traders, at to the lowest degree in the U.South.

Outside the country, the crypto derivatives bug appears to exist spreading, with nations like Singapore taking definitive steps to regulate the market fairly. However, in the U.Grand., fiscal regulators are reportedly planning to result a ban on crypto derivatives, citing customer protection concerns. The U.K. government says it will not interfere in the decision, and several industry stakeholders accept called on authorities not to get alee with the planned prohibition.

CBOE pulls out, CME trades $92 billion in two years

With the Chicago Board Options Exchange pulling out of the Bitcoin futures market place in March 2022, the field became clear for the other provider of cash-settled BTC futures — the Chicago Mercantile Exchange. When CBOE decided to pull out, the underlying asset was notwithstanding recovering from a 2022 price driblet that saw BTC almost slide below $three,000.

The following month would usher in the beginning of a resurgence for BTC, with its price near touching $14,000 in late June. While the BTC spot price was on the rise, CME's Bitcoin futures trading volume also began to spike.

As previously reported by Cointelegraph, open positions on CME Bitcoin futures continued to increment for nearly of 2022. By the summertime of 2022, CME was announcing a notional value record of $i.7 billion.

While the BTC spot market somewhen took a downturn in Q3 2022, interest in CME Bitcoin futures all the same remained high. By mid-September 2022, CME was asking the CFTC to increase its BTC futures capacity due to accelerating need.

According to an article published on LinkedIn on December. 18 marker the second ceremony of CME's Bitcoin futures launch, the exchange revealed that it had traded more than 2.4 million contracts with a notional value of over $92 billion from 12.5 million BTC.

Commenting on the 2022 performance, Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products, declaring, "Nosotros're creating a forward bend for this market, and so investors can better discover prices and manage price take a chance."

In an e-mail to Cointelegraph, McCourt further highlighted the popularity of the CME Bitcoin futures contract, stating, "nearly one-half of all trading volume is from outside the U.South. in 2022 year to date."

Derivatives growth: Proof of greater BTC asset maturity?

With institutional hedging continuing to grow throughout the year, several commentators began to argue that Bitcoin was becoming a more mature asset. In an email to Cointelegraph, Shigeki Kakutani, CEO of QURAS, a "privacy 2.0" decentralized protocol that allows anonymous transactions via smart contracts, remarked that an increasing number of trading exchanges are entering the derivatives game simply as BTC volatility has begun to lessen in comparison to previous years. He added:

"Bitcoin derivatives take overall been a positive for Bitcoin as this allows for more traditional institutional investors to gain comfort in the market as derivatives are widely used in traditional financial markets. Although still a relatively immature market, derivative products such as CME's Bitcoin Futures, OKEx's Perpetual Swap, and Bakkt's Bitcoin Futures, are driving massive demand and have outpaced Bitcoin spot trading this year."

In previous years, Bitcoin's wild price swings have formed a major office of the narrative for critics who argue that BTC wouldn't make a suitable bet for institutional investors but instead remain a speculative play.

Commenting on the role of crypto derivatives in the financialization of the broader virtual currency market, Tamer Dagli, CEO of Sinovate — a peer-to-peer blockchain digital currency projection — told Cointelegraph:

"Volumes for derivatives started to accept off when the market started the downturn in 2022, and traders looked for ways to profit from falling prices. The trading activity using these products now exceeds spot trading, which draws parallels to how this happened to traditional markets in the 1970s and where now, most trade is made using derivatives."

For Dagli, the U.S. Bitcoin futures scene has potential to serve every bit a viable onramp for more than institutional adoption. As part of his notation to Cointelegraph, the Sinovate chief remarked that, "The global market place for derivatives is enormous, estimates put information technology over $500 trillion, and the current crypto market is tiny in comparison." He went on to say that the emergence of derivatives is essential for future adoption while also admitting that derivatives are probable to lower volatility.

Dagli, yet, contends that much of the positives tied to Bitcoin futures and crypto derivatives generally remain within the institutional loonshit. On the retail side of the market, the Sinovate CEO explained that there are issues regarding customer protection, stating:

"From an institutional standpoint, derivatives are essential if information technology is to exist adopted in the broader global money markets. When used correctly, they offer a fashion to hedge trades and manage adventure. Many institutional traders will non even consider entering the space unless they accept these tools. From a retail perspective, they take been mixed. The extremely high leverage that is available on many of the retail derivative products attracts traders to make hazardous trades."

Bakkt launches physically settled Bitcoin futures

One of the major stories from the latter office of 2022 was the news that the Intercontinental Substitution operators of the New York Stock Exchange was set to launch Bakkt — a physically settled Bitcoin futures platform. Delays from needing to shine regulatory wrinkles with the Commodity Futures Trading Commission meant that Bakkt didn't see its launch until late September 2022.

Despite a irksome beginning, Bakkt Bitcoin futures trading began to soar, with contract volume and open positions setting new highs. Bakkt'southward launch likewise coincided with a downturn period for BTC, with some suggestion that the physically settled Bitcoin futures product was exerting negative pressure on the spot market.

Right from the onset, Bakkt reiterated its determination to list physically delivered Bitcoin futures as a path toward creating a more than robust cost discovery paradigm for BTC as a whole. Writing on the visitor's Medium account dorsum in 2022, Bakkt CEO Kelly Loeffler stated:

"With our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract volition non be traded on margin, apply leverage, or serve to create a paper claim on a real asset."

As previously reported by Cointelegraph, Bakkt's chief operations officeholder, Adam White, on the potential impact of Bitcoin futures on the token's toll discovery remarked, "We hope the Bakkt daily and monthly futures contracts lead price discovery."

Post-obit the launch of its physically-delivered BTC futures product, Bakkt introduced Bitcoin options every bit well equally a cash-settled Bitcoin futures contract, which debuted in ICE Singapore earlier in Dec. Despite Bakkt branching into greenbacks-settled Bitcoin futures and possibly challenging CME, the latter has come out to say it has no intention of listing a physically settled BTC futures product, nevertheless, CME will be launching a Bitcoin options product in January 2022. In an electronic mail to Cointelegraph, CME'south McCourt remarked:

"At this time, CME Group has no plans to introduce additional cryptocurrency futures. Right now, nosotros are focused on bringing options on CME Bitcoin futures to market Jan. 13, 2022, and standing to grow our CME CF Cryptocurrency Indices."

Bitcoin options and the prospects of crypto derivatives in 2022 and beyond

Dorsum in Oct 2022, CME predicted that Bitcoin options will experience high demand in the Asian market. Some exchanges, including Bakkt, are expanding their services in the region, with new participants even entering the fray.

In a chat with Cointelegraph, Jack Tao, CEO of Phemex — i of the new entrants to the Asian crypto derivatives scene — commented on the room for growth in the sector, stating:

"Our research shows that the derivatives market will grow significantly in 2022. Compared to traditional markets, the total volume of crypto is however relatively small and growth has been a consequent factor every year, regardless of bullish or surly sentiments. We believe that increasing trust in few selected currencies is now allowing more than and more people to venture into leverage trading, where a certain degree of volatility can exist a positive factor."

In November, Tassat joined the puddle of platforms looking to become regulated crypto derivatives exchanges. Tassat obtained a swap execution facility approval by acquiring already licensed trueEX — a financial services firm based in New York. When asked most the visitor'due south next steps, Tassat's chief commercial officer, Michel Finzi, wrote to Cointelegraph, stating that the company is getting ready to launch their first production, a leveraged, physically deliverable Bitcoin swap:

"We take been in user acceptance testing (UAT) for some time and accept a number of participants lined upwardly. From a technological and regulatory point of view, we have the ability to launch our exchange when both nosotros and our clients are ready. Our focus is on making sure all operational matters are properly attended and so that we can accept a successful launch."

With this expected increase in crypto derivatives trading, spot prices of cryptocurrencies could be negatively affected. For McCourt, such fears are unfounded. "Many factors tin impact prices, including supply and need of concrete Bitcoin, geopolitical events or other macroeconomic factors," wrote the CME executive in an email to Cointelegraph. Providing farther commentary on the prospects of the crypto derivatives market, Kakutani of QURAS wrote to Cointelegraph, stating:

"Although still a relatively young market, derivative products such as CME's Bitcoin Futures, OKEx's Perpetual Swap, and Bakkt's Bitcoin Futures, are driving massive demand… One of the advantages of Bitcoin derivatives is that leverage tin be used to brand big transactions with a pocket-sized amount of majuscule while being able to forecast future market adventure and speculate on price volatility. However, if the number of BTC derivative transactions increases significantly, there is a possibility that the derivatives will cause Bitcoin's market toll to rise or fall sharply."

While optimism manifestly remains high, crypto derivatives platforms in the U.S. will exist hoping that the Commodity Futures Trading Commission doesn't take a leafage from the playbook of the U.K.'due south Fiscal Behave Authority in moving toward banning crypto derivatives. The U.K.'s top financial regulator argues that the market poses risks to retail investors.