Jun 30, 2021
Date: Tuesday 22nd June
Role: Head of OTC Options Trading
Derivatives are contracts that allow traders to take a position with an asset based on possible outcomes; while they can provide dramatic rewards, they come with risk.
Derivative exchanges have been a growing part of the maturing bitcoin ecosystem. However, with the rise of exchanges like FTX and Binance, offering high leverage, there is an increasing lens on these exchanges.
Derivative contracts are a valuable tool for experienced traders. With exchanges offering leverage of up to 125x, inexperienced traders can quickly amass significant losses.
Whenever bitcoin has a sharp move in either direction, those on the wrong side of the trade often get liquidated. These capitulation events regularly wipe out hundreds of millions or even billions of dollars in positions.
Some people suggest that high amounts of leverage are detrimental to the price discovery of bitcoin, but it's clear from the rise of certain exchanges that these are the types of markets traders want.
In this interview, I talk to Juthica Chou, Head of OTC Options Trading at Kraken. We discuss how bitcoin derivatives work, the different types of contracts, and Microstrategy's leverage plays.