Delphi Digital: On the Eve of the On-Chain Options Boom

Written by: Delphi Digital

Compiled by: AididiaoJP, Foresight News

The cryptocurrency options market is far larger than most people realize. Trading volume in cryptocurrency derivatives on the Chicago Mercantile Exchange (CME) is up 46% from its record high set last year. Institutional investors need clear risk management tools to hedge large positions, and options are the only cryptocurrency instrument that can provide this functionality.

Reshaping the landscape

By mid-2025, total open interest in Bitcoin options reached $65 billion, surpassing open interest in futures for the first time. Futures are leveraged instruments, while options allow funds to set a loss cap on their $500 million Bitcoin positions by paying premiums. This turning point indicates that instruments with risk-defining capabilities are gradually replacing purely leveraged instruments.

This growth is primarily concentrated on two platforms. Deribit, a dominant platform for cryptocurrency options trading for years, gained institutional backing after being acquired by Coinbase for $2.9 billion in 2025. Meanwhile, IBIT options, launched in late 2024, have brought traditional financial capital into the field. The options market is expanding rapidly, but the vast majority of transactions still require intermediaries.

On-chain options are still in their infancy

The market share of decentralized derivatives has climbed from 2% to over 10% in two years. Hyperliquid has proven that decentralized exchanges (DEXs) can rival centralized exchanges in speed and transparency. However, no comparable representative project has yet emerged for on-chain options.

@DeriveXYZ remains the leading on-chain options protocol, with over $700 million in notional options trading volume in the past 30 days. Launched in August 2021 under the name Lyra as an Automated Market Maker (AMM), the protocol underwent a complete overhaul in 2023 after the bear market and now features a gas-free central limit order book built on its own OP Stack Layer 2.

This restructuring completely changes the pricing mechanism. Market makers quote prices directly on the order book, resulting in narrower spreads, more precise pricing, and support for larger-scale transactions. Traders can enjoy zero fuel costs and sub-second execution speeds.

Its portfolio margin system has also attracted institutional attention. The system assesses overall position risk through scenario analysis. For example, if a trader simultaneously holds a long call option and a short put option on the same underlying asset, the system will not charge separate margin for each leg.

The collateral required for the hedged position is lower than the sum of the individual positions, which is the common logic of traditional financial derivatives trading platforms. Derive also offers perpetual contracts and lending services on the same Layer 2 and supports cross-product margining.

@KyanExchange is moving in the same direction in different ways. The platform combines an order book matching engine with on-chain portfolio margin, enabling multi-leg operations to be completed in a single atomic transaction. Traders can deploy Iron Vulture strategies with just a few clicks.

Kyan's liquidation mechanism also differs from most DeFi protocols. When the margin threshold is breached, the platform does not liquidate the entire account; instead, it performs partial liquidation, closing only the minimum positions required to restore the account's margin requirements. Kyan is currently in the Arbitrum testing phase, with its mainnet launch imminent.

Who needs stock options?

Asset management companies building structured products urgently need the clearly defined risk-return structure provided by options trading. Take JPMorgan's Equity Premium Income ETF as an example; this fund, constructed based on a covered call strategy, is one of the world's largest actively managed funds. The total assets under management of derivatives-based income products have exceeded $100 billion. As more institutional funds enter the blockchain, the corresponding hedging demand will also shift.

Currently, a growing number of institutional investors hold or plan to allocate digital assets in the near term. Open interest in IBIT options has surpassed that of the gold ETF GLD. In 2025, CME processed $3 trillion in notional trading volume in cryptocurrency derivatives.

The time is ripe

The primary reason most early on-chain options protocols failed to survive was regulatory uncertainty. For example, Opyn was penalized by the CFTC for operating a derivatives exchange without a license. At the time, the team couldn't predict whether the product would be deemed illegal the following quarter.

This situation is improving. In September 2025, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly issued a statement allowing regulated exchanges to conduct spot cryptocurrency trading. The Clarity Act has passed the House of Representatives, proposing to place the digital commodity spot market under CFTC regulation. The Senate version is still under negotiation and is currently stalled. CME Group will launch 24/7 cryptocurrency options trading on May 29. While this does not guarantee the inevitable success of on-chain protocols, the overall environment has undergone a substantial shift.