The Crypto Derivatives Management Insight Report is free to read for qualified, to request your copy visit https://www.acuiti.io/q1-2023-crypto-derivatives-management-insight-report/
London – 15 March 2023: Participants in the crypto derivatives market are holding less money at exchanges, onboarding with third-party custody providers and calling for greater regulation of crypto-native markets, the latest Acuiti Crypto Derivatives Management Insight Report has found.
This quarter’s report, which is based upon a quarterly survey of the Acuiti Crypto Derivatives Expert Network, a group of over 70 senior executives from asset managers, hedge funds, sell-side firms, and proprietary trading groups active in trading crypto derivatives and produced in collaboration with Digital Asset Research (DAR) and Cloudwall, marks the first institutional study of how the institutional market has responded to the collapse of FTX in November 2022.
Over three-quarters of the Expert Network thought that there would be a permanent separation of exchange and custody functions as investors look to reduce concentration risk. Almost as many respondents predicted a heightened regulatory response while around a third predicted consolidation among native crypto markets, a shift of liquidity to onshore regulated markets or to OTC markets.
However, just 14% thought that the collapse of FTX would result in significantly lower institutional participation in crypto markets, reflecting the ongoing resilience of the industry as it goes through its challenging formative years.
Since the collapse of FTX, several crypto derivatives exchanges have published proof-of-reserves to reassure investors of their client fund management processes. However, 64% of the Expert Network said that they remained concerned with the quality of proof-of-reserves from most exchanges.
In addition, counterparty risk remained a key concern for the Network with 47% saying that they were very concerned with this risk factor compared with 31% for operational risk, 13% liquidity risk and just 6% for market risk.
DAR CEO Doug Schwenk said: “The survey results are enlightening and encouraging for the growth of the crypto derivatives market. We’re pleased to help fuel this growth with our Counterparty Diligence offering.”
The report also found that the crypto derivatives community was increasing investment in risk management with almost half of firms planning an investment in the next 12 months. The findings also suggested a move away from inhouse builds as the quality and sophistication of third-party software available to the market continued to increase.
Kyle Downey, CEO, Cloudwall, said: “This survey offers significant, timely insights into the crypto derivatives market post-FTX. Cloudwall’s Serenity digital asset risk platform offers a full suite of risk management and pricing tools for crypto derivatives traders to help support this growing market.”
Other key findings in this quarter’s report include:
- There is strong demand for a volatility index in crypto derivatives markets but it should reference more than just BTC
- Optimism is high for a recovery in digital assets markets over the next three months with 75% of the Expert Network either quite or very optimistic about the quarter ahead
- Firms are lowering maximum exchange exposures and diversifying exposures across exchanges following the collapse of FTX
Will Mitting, founder of Acuiti, said: “This quarter’s report demonstrates the resilience of the crypto derivatives market as it recovers from an immensely challenging year. With every challenge the market has faced in its short existence, it has come back stronger and strengthened the foundations.”
Download full report here: https://www.acuiti.io/q1-2023-crypto-derivatives-management-insight-report/
For more information, contact Nastja Konic at Acuiti
Tel.: +44 (0) 203 998 9190
Acuiti is a management intelligence platform designed to provide Senior Industry Professionals in the Derivatives Industry with high-value insight into industry-wide performance and business operations. Acuiti provides a platform through which our exclusive network of Senior Industry Executives can share and source information on day-to-day operational challenges, providing them and their management teams with increased transparency and in-depth analysis to make more informed decisions and benchmark company performance. Financial Institutions benefiting from our services include Banks, Non-bank FCMs, Brokers, Proprietary Trading Firms, Hedge Funds and Asset Managers.
Digital Asset Research (DAR) is a specialized provider of highest quality ‘clean’ digital asset data and insights for institutional clients. Since 2017, DAR leads by rigorously vetting exchanges, counterparties, and assets to eliminate the noise for flagship clients such as Bloomberg, Chainlink, FTSE Russell, and Wilshire.
Using crypto and traditional finance expertise, DAR combines consolidated market data feeds and risk measurement tools, including counterparty diligence, for clients seeking to identify the best crypto spot and derivatives markets and avoid the next FTX.
DAR’s success is driven by its independence and a commitment to deliver ‘clean’ data emphasizing accuracy, quality, and transparency.
Cloudwall is an NYC- and Singapore-based software provider offering a range of digital asset risk models and tools for crypto spot and crypto derivatives as part of its cloud-based Serenity risk management platform for institutions. Models include factor risk; PCA; an SVI-based volatility model; and historical VaR. Tools include portfolio risk attribution; portfolio stress testing; OTC & listed option pricing; visualization of BTC/ETH yield curves and volatility surfaces; portfolio VaR calculation; and portfolio VaR backtesting. Cloudwall is committed to offering a full suite of real-time portfolio risk tools for the full spectrum of risks faced by active asset managers trading in digital assets today, across the full range of instruments, including spot; listed derivatives; OTC derivatives; and DeFi. Visit https://cloudwall.tech for more information or request a demo.