Binance Launches Ethereum and XRP Options Contracts, More Volatility in Prices?

World’s largest cryptocurrency exchange, Binance, announces addition of options contracts for Ethereum and XRP. It becomes the first exchange to add support XRP options. 

Options are financial derivatives with leverage which allows the buyer of the contracts to buy (call option) or sell (put option) the underlying asset at a specified price on expiry.

#Binance Options Lists @ethereum $ETH and $XRP Contractshttps://t.co/jH2dC51XwD pic.twitter.com/V3IXYhhYtY

— Binance (@binance) May 25, 2020

Until now, Deribit exchange has been the leading platform for Ethereum options and also leading the space for Bitcoin options with over 75% market share. The average Open Interest for Ethereum options on Deribit since launch in May last year is around $39 million. It is currently at at an All-Time High with respect to number of ETH. Nevertheless, Binance aims to dominate that market as well.

ethereum options
Ethereum Options Market Total OI on Deribit (Source)

Moreover, the addition of XRP options is likely to up the ante on altcoin speculations as well. BitMEX was the one of the first major derivatives exchange to offer XRP futures in February this year, besides Binance, Okex, Poloniex and a select few exchanges. Binance is one of the few exchanges which offers futures contracts for a variety of cryptocurrenices.

While the risk is reduced with options contracts, the choice of trading futures or options depends on the preference of traders. Furthermore, the premium around the price of options can act as a robust indicator of market sentiments. However, it also stands to add more volatility in prices.

Do you think the addition of trading products is good or bad for long-term adoption of cryptocurrencies? Please share your views with us. 

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