Exotic options, structured products, and collateralized debt obligations will become increasingly lucrative options for crypto trading in 2024.

During the 2017 bull run, initial coin offerings (ICOs) were all the rage. The last bull market — in 2021 — was dominated by the growth of decentralized finance (DeFi) and yield farming. Now, as a fresh bull cycle gathers pace, 2024 will bring a breadth of more sophisticated financial products on-chain. From complex derivatives to structured products, big-boy instruments and traders will enter the digital-asset playground.

As we have seen with previous cycles, the crypto ecosystem tends to closely follow the traditional financial (TradFi) market. After all, Bitcoin BTC $43,597 was first designed as an alternative payment system. ICOs even borrowed their name from TradFi's initial public offerings (IPOs), which date back to 1783.

Meanwhile, the DeFi ecosystem mimics traditional financial services, such as lending, borrowing, and yield generation, only in a decentralized manner. So it seems only natural that more complex financial vehicles should eventually get a Web3 makeover.

Already, we have seen impressive growth in the crypto derivatives market. November saw derivatives trading volumes spike 37.3% month-on-month to $2.58 trillion, the highest since March, though their share of the overall crypto market dropped from 79.9% in September to 73.3%. At the same time, open interest in crypto options has been hitting fresh all-time highs.

Alongside this healthy recovery, we are also seeing more sophisticated derivative products, such as the rise of decentralized perpetual futures trading and innovative risk management mechanisms. This will be a key area for innovation as we head into the new year, while we will also see the launch of new complex products that mimic traditional counterparts.

In particular, we’ll see growth in exotic options, structured products, and collateralized debt obligations (CDOs) in the crypto space. We have seen some attempts at crypto CDOs — notably from Opium Finance back in 2021 — while the crypto structured products market is quietly gaining steam.

However, these complex products are still a small fraction of the overall crypto market. For example, on-chain structured products compose just 0.21% of crypto’s total market cap, opening a possibility for significant expansion.

Source - Coin Telegraph