Derive Protocol has seen unprecedented activity in its on-chain options market, highlighting the rising demand for cryptocurrency-linked derivatives. This surge in interest aligns with the broader trend of growing appetite for crypto-related derivatives, including those tied to Bitcoin (BTC) and other digital assets.
As CoinDesk reported last week, there’s been a notable increase in the use of derivatives such as options, perpetuals, and structured products in the decentralized finance (DeFi) space. Derive has emerged as a key player in this area, offering a unique, programmable environment for on-chain trading.
The platform has surpassed $100 million in total value locked (TVL), alongside record levels of trading volume and active traders. “Derive.xyz’s market insights indicate exceptional growth, with TVL crossing the $100 million threshold for the first time, driven by record-breaking weeks for both trading volume and active traders,” said Sean Dawson, head of research at Derive, in an email to CoinDesk.
Dawson also highlighted that the platform has reached a 10% yield on all USDC deposits and set all-time highs in notional volume at $369 million, as well as monthly active trades at 5,416.
Derive operates across three components: Derive Chain (the settlement layer for transactions), Derive Protocol (enabling permissionless, self-custodial margin trading of perpetuals, options, and spot), and Derive Exchange (an order book platform). This combination offers users a robust and flexible environment for trading and investing.
The growth in activity on Derive is consistent with the increasing demand for options tied to cryptocurrencies and digital asset-related products, such as spot ETFs and crypto stocks. Options are financial derivatives that grant the buyer the right to buy or sell an underlying asset at a predetermined price within a specific timeframe. A “call” option is a bullish bet, giving the buyer the right to purchase, while a “put” option represents a bearish bet, allowing the buyer to sell.
One notable strategy seen recently on Derive involved a whale who sold BTC calls, earning over $1.6 million in premiums. This covered call strategy involved short positions on March-expiry BTC call options with strike prices ranging from $105,000 to $130,000. If Bitcoin remains below $105,000 by the end of March, the whale keeps the premium. If the price rises above $130,000, the long spot position will offset the potential loss.
Another popular strategy among traders involves using sUSDe, a reward-bearing token earned by staking Ethena’s USDe stablecoin, as collateral on Derive to borrow USDC at lower rates compared to other lending platforms. Traders then use the borrowed USDC to purchase more sUSDe, creating a cyclical process. These “DeFi carry trades” yield double-digit returns due to the positive spread between sUSDe’s 28% annualized yield and Derive’s USDC borrowing rate of around 18%.
