Although cryptocurrencies were designed to be an alternative to government-issued fiat currencies, they eventually became popular as assets for investment. This is reflected in the variety of crypto-related financial products that have come up on various platforms.
One such popular investment type is cryptocurrency derivatives. Crypto derivatives are products whose value is determined by the value of the underlying cryptocurrency such as Bitcoin or Litecoin. These are primarily used for speculating future crypto price movements though they can also be used for hedging.
This article will tell you more about crypto derivatives, their types and the best crypto derivatives exchanges.
What are Crypto Derivatives Exchanges?
Crypto derivatives exchanges are trading platforms that facilitate the trading of cryptocurrency-based derivatives. These can be standalone platforms specializing in derivatives trading or general cryptocurrency exchanges that offer derivatives trading as one of the many services provided.
Derivatives are products or contracts that derive their value from an underlying asset. These assets can be stocks, commodities, bonds or even fiat currencies. In the crypto market, the underlying asset is, of course, cryptocurrency.
As these assets are sold at a predetermined time and place, derivatives buyers and sellers have to enter a contract for selling the asset underlying a derivative. Here, derivatives trading differs from spot trading as traders in the former case do not own the underlying asset.
An Ethereum derivative, for example, does not represent the ownership of Ethereum itself. The derivative contract just obtains its value from the value of Ethereum.
Types of Cryptocurrency Derivatives
Crypto Futures
In futures trading, there is a contract between the buyer and seller regarding the sale of an asset in the future. The selling price of the asset and even the date and time are predetermined. Such a contract is usually settled in USD though any currency agreed upon by the buyer and seller can be used.
Futures are generally used by institutional investors to make profits out of future price changes. In addition, futures data is often used to predict market sentiment and future price movements of a cryptocurrency.
Crypto Options
Options trading is similar to futures trading in the sense that it is a contract between buyers and sellers to sell an asset at a predetermined price in the future. However, unlike futures contracts, options give the buyer the choice to not buy the asset in the future.
In other words, it gives the buyer the right but not the obligation to buy an asset at a specific rate or time. Options trading is a complex venture through which traders speculate on the price movement of a cryptocurrency with the aim of earning profit.
Options contracts can be of many types. While call options allow buyers to buy crypto on a particular date, put options enable a seller to sell crypto on a particular date. Plus, while European options need to be sold on the exact agreed upon date, American options can be sold before the contract expires.
Perpetual Contracts
Perpetual futures contracts, like their name, do not have an expiry date. Here, traders can keep the position open as long as they want by paying a certain amount as holding fees. A minimum amount known as a margin is also to be maintained in the account.
Perpetual contracts are used for speculating price movements. Traders can either go for short position where they speculate on the future price being lower than the current one or long position where they speculate on the future price being higher than the current one.
The difference between the two can be huge as the underlying value of various assets changes over time.
7 Best Derivatives Crypto Exchanges
Binance
Binance is a versatile exchange supporting 350+ cryptocurrencies for several trading options including futures trading, options trading and swap farming. Here, you can also find locked and passive products for earning passive income and a native token called BNB.
It is an absolutely giant exchange that boasts extremely low trading fees and several opportunities to grow your crypto holdings. You can avail of crypto loans in several tokens on Binance.
Binance is completely KYC-compliant and also mandates 2-factor authentication(2FA) for account security. It also sends out alerts and e-mails if any suspicious activity is detected. Binance also lets you restrict withdrawal access to a select few wallets or IP addresses.
Features
✔️Supports spot, options and futures trading
✔️BNB token is the exchange’s utility token
✔️KYC Verification is compulsory
✔️2FA and personalized access controls for security
Pros and Cons
✅Variety of order types ❌Regulatory problems in many countries
✅Great coin collection ❌Not for novice traders
✅Safe Asset Fund for Users
✅End-to-end data encryption
Trading Fees
There are VIP levels on Binance that are charged trading fees as per the 30-day trading volume and their BNB balance. Users are also given discounts if they make payments with BNB.
Binance trading fee schedule
Customer Reviews
Binance Visa card is used for making merchant payments
Binance’s customer support is often non-responsive
Why We Picked It
Binance is a multifaceted exchange with lots of functionalities, especially for derivatives traders. The variety of products and features available here, however, may be overwhelming for beginners. Meanwhile, traders at intermediate or advanced levels would definitely like the various options offered by Binance.
OKX
Seychelles-registered cryptocurrency exchange OKX(formerly OKEx) is a platform providing its customers with low fees, fast transactions and powerful APIs. Aiming at developing its own crypto ecosystem, this platform even has its own OKX Chain and a native token OKB which set it apart from other similar exchanges.
The OKX exchange supports margin trading and along with that, options trading and perpetual swaps. In addition, you also get many options for crypto loans and crypto mining services here. With the Jumpstart Mining Initiative, you can check out many interesting DeFi projects and even farm DeFi tokens.
OKX implements a multi-level security system in order to protect user assets. It prevents online attacks by using a special network communication protocol that always remains partially offline.
Features
✔️Over 350 cryptocurrencies available
✔️Native blockchain called OKX Chain
✔️OKX Web3 Wallet supports 40+ networks
✔️Spot, futures and options trading available
Pros and Cons
✅Fees are not very high ❌Lousy customer service
✅Several payment options ❌Complex structure for fee calculation
available
✅Learning material
✅Demo trading for practice
Trading Fees
OKX divides users into regular and VIP categories. Traders are then charged fees based on OKB holdings, asset holdings or their 30-day trading volume.
OKX exchange trading fees
Customer Reviews
Customers find OKX to be a platform that can be easily navigated
OKX’s customer support can often be bad
Why We Picked It
Futures and options trading are supported on OKX. Apart from that, it offers users crypto-based loans and mining services. On OKX, you can also explore DeFi apps and even farm some DeFi tokens.
Bybit
In this list, Bybit is one of the few platforms that are primarily for derivatives trading. This is an exchange suitable for experienced traders who would like to take advantage of the lucrative returns it offers. On Bybit, Decentralized Finance(DeFi) is combined with Traditional Finance(TradFi) to offer users next-level services.
Though mainly focusing on derivatives, Bybit does support spot trading as well. With 280+ spot trading pairs, Bybit is a regular feature in CoinMarketCap’s top 10 cryptocurrency exchanges. It is also one of the top platforms for derivatives trading.
Bybit has a great security system and 99.99% functionality with a 100k TPS matching engine. In other words, this platform claims to process about 100,000 transactions at a time which is quite fast. In addition, Bybit employs technologies like data encryption, Trusted Execution Environment(TEE) and Threshold Signature Schemes(TSS) to protect user accounts from unauthorized access.
Features
✔️Primarily a derivatives trading exchange
✔️280+ spot trading pairs available
✔️World’s biggest USDC Options marketplace
✔️USDT as collateral for perpetual contracts
Pros and Cons
✅Easy-to-use interface ❌Not the best option for spot trading
✅Inexpensive trades ❌Unverified trade statistics
✅Several order types supported
✅Testnet site for demo trading
Trading Fees
Bybit users are categorized into non-VIP, VIP and Pro. The fees here for all categories including non-VIPs are on the lower side with fees for perpetual and futures contracts beginning at 0.06% taker fees and 0.01% maker fees.
Bybit cryptocurrency exchange trading fees
Customer Reviews
Bybit is known for its fantastically slick user interface
There have been allegations regarding price manipulation on Bybit
Why We Picked It
Bybit is a top-notch crypto trading platform, particularly for derivatives trading. The website as well as the mobile app are known for their slick UI and fast transaction settlements due to Bybit’s 100k TPS matching engine.
KuCoin
KuCoin is a cryptocurrency exchange headquartered in Seychelles that is simply incomparable in the sheer variety of cryptocurrencies it offers for trading. With over 700 cryptocurrencies, there are barely any crypto exchanges that can compete with KuCoin in this department. Combined with the platform’s low trading fees, it is an excellent choice for all types of crypto traders.
KuCoin supports crypto lending and also runs a referral program where you get lucrative commissions for inviting your friends to KuCoin. The platform has a social wallet known as Halo Wallet with which you can check out the latest market news and trends.
On KuCoin, industry-standard security measures such as multi-factor authentication and data encryption are implemented. But along with the usual login password, you can here also opt for an additional password for trading.
Features
✔️700+ available cryptocurrencies
✔️Multi-lingual exchange
✔️Native token is called KuCoin Token(KCS)
✔️Multi-factor authentication, trading password and wallet address verification
for security
Pros and Cons
✅Massive variety of coins ❌Complicated fee structure
✅Fees are on the lower end ❌No strict vetting of coins
✅Crypto loans available
✅Trading bots available
Trading Fees
KuCoin has a rather complex system for determining trading fees. It consists of multiple levels and classes with several criteria that are used for charging fees.
KuCoin trading fees
Customer Reviews
KuCoin has an excellent variety of cryptocurrencies for trading
Complaints of poor customer service on KuCoin
Why We Picked It
KuCoin is an excellent choice for people who want to have a wide variety of cryptocurrencies at their disposal on a single platform. It may not be the most beginner-friendly platform but the low fees along with features such as trading bots and Halo wallet make KuCoin a great option for crypto trading.
Bitget
Bitget is one of the top crypto derivatives trading platforms and an exchange that is heavily oriented towards social trading. It is reflected in the products that the exchange has developed such as One-Click Copy Trade and Grid Trading. These services encourage traders to interact with each other and the larger crypto community to exchange market information.
Bitget is licensed and regulated as a Money Service Business(MSB) in the US and Canada. The data on Bitget is protected with SSL encryption and it has also created a protection fund for the security of user assets.
Features
✔️Copy trading and grid trading
✔️Has a native token known as BGB
✔️Nearly 400 crypto coins available
Pros and Cons
✅Great selection of coins ❌Does not support fiat deposits
✅Enables social trading ❌Copy trading can be a risky venture
✅Low trading fees ❌Third-party providers charge a high fee
✅Protection fund for user assets for buying crypto
Trading Fees
Bitget charges a flat 0.1% fee for spot trades though it gives discounts if its native BGB is used for payments. For futures, the taker fees are a flat 0.06% while maker fees are 0.02%.
Bitget spot trading fees
Bitget futures trading fees
Customer Reviews
Bitget provides users with a great trading experience
Bitget’s customer support needs improvements
Why We Picked It
Bitget has good cryptocurrency options at reasonably low trading fees. Further, its one-click copy trading is a truly novel feature that may be of interest if you would like to follow the strategies of top traders on the platform.
Kraken
Kraken is one of the OGs of the crypto business and one of the few that are still going strong. This San Francisco-based exchange provides you with over 200 cryptocurrencies for trading and that too, at dynamic prices. On Kraken, you can get as much as 24% rewards for staking your crypto assets.
As Kraken has very low spreads, it will help you in lowering the average cost per trade and its high liquidity ensures that you can execute large volume trades at stable prices. This is something that would be particularly useful for derivatives traders.
Features
✔️More than 200 cryptocurrencies available
✔️Two versions- Basic and Pro
✔️Spot, margin and futures trading supported
✔️Cryptocurrency indices available
Pros and Cons
✅Satisfactory crypto collection ❌Costly trades on basic version
✅KYC verification mandatory ❌Reports of accounts being hacked
✅Asset staking opportunities
✅High liquidity
✅Extensive learning resources
Trading Fees
On Kraken Instant Buy, you have to pay dynamic fees determined by factors like order size, payment method and asset type. On Kraken Pro, however, the conventional maker-taker method is used.
Trading fees for Kraken Instant Buy
Trading fees for Kraken Pro
Customer Reviews
Users find Kraken’s customer service to be helpful
Accounts have often been closed on Kraken
Why We Picked It
Kraken is an old and stable platform with high liquidity. Executing large-volume trades is, therefore, a breeze on it. Kraken offers many services notably including cryptocurrency indices and OTC services. It also features extensive resources for learning about cryptocurrency.
Gate.io
Gate.io is known for its massive cryptocurrency collection and with over 1,400 coins in its kitty, this reputation is well-built. Along with that, this exchange also supports around 20 fiat currencies which is higher than what is offered by the average crypto exchange.
Gate.io supports a variety of trading options including derivatives trading. You also get the option of trading ETFs on this platform. With Gate.io’s strategy bots, you can automate your trades and increase profits. The exchange also features an NFT marketplace where you can explore different types of NFTs, mint your own tokens and earn income via royalty on them.
Features
✔️Over 1,400 digital assets available
✔️Spot, margin, derivatives trading and ETFs available
✔️Has an NFT marketplace
✔️Native token is Gate Token(GT)
Pros and Cons
✅Giant coin collection ❌Previous hacking incidents
✅20+ fiat currencies supported
✅Strategy bot for automating trades
✅NFT marketplace to explore and mint
tokens
Trading Fees
Users are put into VIP levels based on the 30-day trading volume on Gate.io. Lower fees are charged to users at higher VIP levels.
Gate.io fees explained
Customer Reviews
Users find crypto trading to be easy on Gate.io
KYC verification on Gate.io can be difficult
Why We Picked It
Gate.io is perfect for traders who have prior crypto trading experience and want an exchange with a diverse coin collection. It supports derivatives trading and you can also check out ETFs here. People interested in NFTs can check out collections and even mint and sell their tokens.