Singapore-based Bitcoin and Ethereum options trading platform Sparrow Exchange has announced the closure of its Series A funding round in which t raised $3.5 million.
According to a Tuesday press release, the funding round was led by BitMEX parent company HDR Group with participation from Signum Capital, Du Capital, and FinLab EOS VC. The exchange currently offers options trading that are settled through smart contracts running on the popular Ethereum virtual machine.
“Our options are settled on Ethereum smart contracts on the NIDUS Chain, enabling automated and transparent settlement of options contracts. Competing platforms are proprietary and closed systems that rely on trust rather than transparency,” Sparrow CEO Kenneth Yeo said.
His company is now a year old having launched in June 2019. According to the announcement, it has settled options worth over $150 million in the 12 months since its launch.
“We are really pleased that the round received strong support despite the harsh economic climate caused by COVID-19. The strong interest from investors validates our view that digital asset options will be the next high-growth market,” Yeo added about the funding round.
Crypto options are derivatives products that allow traders to speculate on the value of underlying assets as opposed to the assets themselves. Traders are offered the choice between either a ‘call’ or a ‘put’ option. The former option allows bullish traders to purchase the right to buy the asset at a later date once the price of the asset has risen at a price lower than the market price. The latter option allows bearish traders to purchase the ‘right to sell’ contract which means that they will be able to sell the asset at a higher price relative to the market price at a later time.
Crypto options are a growing trend borrowed from the traditional markets but with the twist of using blockchain innovation to modernize the options settlement process. As stated above, Sparrow Exchange uses smart contracts to settle trades which not only increases the speed of settlement but also reduces the significance of trust through the use of transparent and more reliable systems.
BitMEX CEO Arthur Hayes commented on the closure of the Series A funding round saying:
“We are seeing significant growth in the digital asset options space with a lot of untapped opportunities. We are excited by Sparrow’s growth potential, the team behind it and are therefore proud to be leading this Series A round.”
Hayes’s exchange was reportedly considering launching options trading in 2019 but has not yet done so. It currently specializes in the trading of cryptocurrency futures, also a part of the derivatives marketplace that is exponentially growing faster than the spot market place.
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