Trading Bitcoin options just got a little less risky.
Deribit, the Panama-based Bitcoin derivatives exchange announced on Thursday integration of ClearLoop, a new solution for the immediate and trouble-free handling of off-chain transfers. With additional protection against liquidations caused by blockchain transaction congestion, the solution could lead to a flow of institutional asset managers in the world’s most popular Bitcoin options exchange.
Developed by London-based crypto infrastructure provider Buyer, ClearLoop enables asset managers and option traders to continue to use their crypto assets while held in secure, secured Copper custody accounts. Bitcoin options are a type of derivative product that gives traders more leeway – an option contract gives traders the right (but not the obligation) to buy Bitcoin at a specified price.
Many institutional investors are wary of holding large crypto exchanges, which often block money during wallet maintenance and are vulnerable to hacking attacks. As a result, it is difficult to write large option contracts that require collateral to be kept in hot purses.
Crypto derivatives are also risky during price fluctuations, when network congestion can delay transactions that would otherwise prevent liquidations. For example, if prices change quickly, such as during the market crash on Black Thursday in March, being able to move money quickly can make all the difference in going out of business.
With ClearLoop, option traders can instantly add collateral from secured Copper custody accounts without waiting for blockchain confirmation.
“We have worked with asset managers and exchanges for more than a year to develop a solution to the three main market issues,” Copper founder and CEO Dmitry Tokarev said in a statement.
“ClearLoop, the result of this partnership, allows investors to settle transactions immediately, keep their assets safe and insured in third-party custody, addressing concerns about self-custody while reducing counterparty risk and associated volume limitations be eliminated. “
Deribit launched in June 2016, originally based in the Netherlands and moved operations to Panama in 2020. Deribit is responsible for nearly 80% of the open interest market of Bitcoin options, which has nearly doubled since April 15, according to data from a crypto analysis company Leaning. The market grew from $ 580 million to over $ 1.1 billion on May 14.
“Integration with ClearLoop is a natural next step for Deribit, as it could potentially address some of the most critical issues facing the derivatives market,” said Deribit co-founder and CEO John Jansen in a statement.
While integrated with Deribit at launch, ClearLoop is likely to be added to other derivatives exchanges as well, given the unique benefits for that crypto asset class. It’s yet another chest tool for those institutional investors looking to test the waters of the decentralized financial tsunami.