On the eve of the explosion of on-chain options

Original Title: Crypto Options Are Waking Up

Original Source: Delphi Digital

Original Compilation: AididiaoJP, Foresight News

The scale of the cryptocurrency options market far exceeds most people's understanding. The trading volume of cryptocurrency derivatives on the Chicago Mercantile Exchange (CME) is 46% higher than the historical record set last year. Institutional investors need clear risk management tools to hedge large positions, and options are the only cryptocurrency tool that can provide this function.

Reshaping the Landscape

By mid-2025, the total open interest in btc-42">Bitcoin options reached $65 billion, surpassing futures open interest for the first time. Futures are leveraged tools, while options allow funds to set a loss limit on their $500 million Bitcoin holdings by paying a premium. This turning point indicates that tools with risk definition capabilities are gradually replacing purely leveraged tools.

This growth is mainly concentrated on two platforms. Deribit has been the mainstream platform for cryptocurrency options trading for years, and after being acquired by Coinbase for $2.9 billion in 2025, it received institutional-level endorsement. Meanwhile, IBIT options, launched at the end of 2024, have brought traditional financial capital into this field. The options market is rapidly expanding, but the vast majority of trades still need to be completed through intermediaries.

On-Chain Options Are Still in Their Infancy

The market share of decentralized derivatives has risen from 2% to over 10% in two years. Hyperliquid has proven that decentralized exchanges (DEX) can match centralized exchanges in speed and transparency. However, on-chain options have yet to see similarly representative projects.

@DeriveXYZ remains the leading on-chain options protocol, with a nominal options trading volume exceeding $700 million in the past 30 days. The protocol was launched in August 2021 under the name Lyra as an options automated market maker (AMM) and underwent a complete reconstruction in 2023 after the bear market, now built on its own OP Stack Layer 2 with a gas-free central limit order book.

This reconstruction has fundamentally changed the pricing mechanism. Market makers quote directly on the order book, narrowing spreads, improving pricing accuracy, and supporting larger-scale trades. Traders can enjoy zero gas fees and sub-second execution speeds.

Its portfolio margin system has also attracted institutional attention. The system assesses overall position risk through scenario analysis. For example, if a trader holds both long call options and short put options on the same underlying asset, the system does not require margin for each leg separately.

The collateral required for hedged positions is lower than the simple sum of each position, which is the common logic in traditional financial derivatives trading desks. Derive also offers perpetual contracts and lending services on the same Layer 2, supporting cross-product margining.

@KyanExchange is moving in the same direction in a different way. The platform combines an order book matching engine with on-chain portfolio margining, allowing multi-leg operations to be completed in a single atomic transaction. Traders can deploy iron condor strategies with just a few clicks.

The clearing mechanism adopted by Kyan also differs from most DeFi protocols. When the margin threshold is breached, the platform does not liquidate the entire account but executes partial liquidations, only closing the minimum positions necessary to restore the account to meet margin requirements. Kyan is currently in the Arbitrum testing phase, with mainnet launch imminent.

Who Needs Options?

Asset management companies building structured products urgently need the clearly defined risk-return structures that options provide. For example, JPMorgan's stock premium income ETF is built on a covered call strategy and is one of the largest actively managed funds in the world. The overall management scale of income products based on derivatives has exceeded $100 billion. As more institutional funds enter on-chain, the corresponding hedging demand will also migrate.

Currently, more and more institutional investors hold or plan to allocate digital assets in the short term. The open interest in IBIT options has surpassed that of the gold ETF GLD. In 2025, CME processed a nominal trading volume of $3 trillion in cryptocurrency derivatives.

The Timing Is Maturing

Most early on-chain options protocols failed to survive primarily due to regulatory uncertainty. For example, Opyn was penalized by the CFTC for operating a derivatives trading platform without a license. At that time, the team could not predict whether the product would be deemed illegal in the next quarter during its development.

The current situation is improving. In September 2025, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly issued a statement allowing regulated trading platforms to conduct spot cryptocurrency asset trading. The CLARITY Act has passed the House of Representatives, proposing to place the digital commodity spot market under CFTC regulation. The Senate version is still under negotiation and currently on hold. CME Group will launch 24/7 cryptocurrency options trading on May 29. Although this does not guarantee that on-chain protocols will necessarily prevail, the overall environment has undergone a substantial change.