Crypto derivatives

A derivative is a contract between two parties that tracks an underlying asset. In crypto the main types are dated futures, perpetual futures (perps), options and, less often, swaps. Traders post margin instead of paying the full value of the position, so they can take leveraged exposure to bitcoin or ether, bet on falling prices or hedge coins they already hold.

Derivatives trade on offshore exchanges such as Binance, OKX, Bybit and Deribit, on regulated venues like CME, and increasingly on decentralized perp exchanges. Their combined daily volume routinely exceeds spot trading several times over, which is why funding rates, open interest and liquidation data are watched as closely as the spot price itself.

Leverage cuts both ways: a small move against a position can wipe out its margin and trigger forced liquidation. Counterparty risk depends on the venue, and many jurisdictions restrict which products retail clients may access, for example the UK ban on crypto derivatives for retail investors.