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CoinDesk 2024-12-10 07:27:34

Derive Protocol Crosses $100M in Value Locked as Bitcoin Whales Make Waves in Options Trading

It's raining options, CoinDesk said last week , pointing to growing demand for derivatives tied to bitcoin (BTC) and other cryptocurrencies. Now, additional evidence has emerged in the form of record activity on decentralized finance (DeFi), which offers unique and programmable onchain options, perpetuals, and structured products. The total dollar value of crypto tokens locked (TVL) on Derive has risen past $100 million, alongside a record-setting trading volume and monthly active traders. “Derive.xyz's latest market insights reveal remarkable growth and heightened activity, with its total value locked surpassing $100 million for the first time, amid record-setting weeks for trading volume and active traders," Sean Dawson, head of research at Derive, told CoinDesk in an email. “Yield on all USDC deposits has reached 10% on Derive.xyz, while it hit all-time highs in notional volume at $369 million and monthly active trades at 5,416," Dawson added. The Derive platform comprises of Derive Chain, a settlement layer for transactions; Derive Protocol, which enables permissionless, self-custodial margin trading of perpetuals, options and spot; and Derive Exchange, an order book. The record activity on Derive is consistent with the widespread demand for options tied to cryptocurrencies and digital assets-related investment vehicles like spot ETFs and stocks. Options are derivative contracts that give the purchaser the right to buy or sell the underlying asset at a predetermined price later. A call gives the right to buy and represents a bullish bet on the market, while a put indicates a bearish bet. Whales sell BTC calls Last week, a whale sold collected over $1.6 million in premium by selling BTC calls against a long position in the spot market. The so-called covered call strategy involved short positions in March expiry call options at strikes, ranging from $105,000 to $130,000. The whale will retain the premium if BTC stays below $105,000 by the end of March. Conversely, the long position in the spot market will compensate for losses stemming from a potential rally beyond $130,000. Another popular strategy among traders has been posting sUSDe, a reward-bearing token earned by staking Ethena's USDe stablecoin, as collateral on Derive to borrow USDC at rates notably lower than other lending protocols. The same is used to buy sUSDe again, and the cycle is repeated. The so-called DeFi carry trades earn a double-digit return owing to the positive spread between sUSDe's 28% annualized yield and Derive's ongoing USDC borrowing rate of around 18%.

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