The Wolf Of All Streets - Traders Bet On Bitcoin Hitting $200,000! Crypto Options Are Booming | Luuk Strijers, CEO Of Deribit

Episode Date: January 26, 2025

In this episode of The Wolf of All Streets, we dive deep with Luuk Strijers, CEO of Deribit, the leading crypto options platform. We uncover how Deribit dominates 85% of the global crypto options market, the strategies institutions use to hedge their positions, and why options are the key to Bitcoin's future growth. Whether you're a retail trader or an industry insider, this conversation is packed with actionable insights you won't want to miss! Luuk Strijers: https://x.com/lstrijers ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEKDAY! 👉https://thewolfden.substack.com/   ►► Arch Public Unleash algorithmic trading. Discover how algorithms used by hedge-funds are now accessible to traders looking for unparalleled insights and opportunities!  👉https://archpublic.com/  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. Use code '10OFF' for a 10% discount. 👉https://tradingalpha.io/?via=scottmelker  Follow Scott Melker: Twitter: https://x.com/scottmelker Web: https://www.thewolfofallstreets.com/ Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #investments  Timecodes: 0:00 Intro 1:58 U.S. Crypto Options Landscape 3:08 Bitcoin vs Ethereum Options 4:27 Institutional Adoption Trends 6:05 Dubai Headquarters Explained 7:15 Institutional Hedges on Deribit 8:50 Understanding Carry Trades 11:02 Bitcoin ETFs vs Options 13:16 How Options Differ Globally 16:02 Why Perpetuals Dominate Crypto 19:42 U.S. Regulation Challenges 22:27 ETF Options Impact 25:36 Arbitrage Opportunities in ETFs 27:10 Trump's Potential Impact on Crypto 30:00 Challenges Entering U.S. Market 34:12 How the Carry Trade Works 38:28 Preparing for Bitcoin's Growth 47:20 Where Are We in the Market Cycle? 52:12 Biggest Bitcoin Bets for 2025 57:25 Options Strategies for Beginners The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Where do you think we stand here sort of coming into the beginning of 2025? So I don't think the perfect scenario will just happen. I think the perfect scenario is the options are totally different beasts than perpetuals. If you buy long options, you can't get liquidated. So it's a totally different way of trading. Can you just give like a very basic idea of how your average person who wants to understand options positioning and what's coming at least on there but um you you have let's take dollars you have used the sea and you buy btc and you sell the btc future in a certain expiry what the price level will be i don't know i never do

any predictions but it will be higher than it is today that that's that's my personal conviction in the united states the options market is much bigger than the underlying spot market for most assets. But this still really is not the case in crypto. Spot drives crypto markets, especially in the United States. But options are maturing and futures and are very popular all over the world, nowhere more than on Darabit, which controls roughly 85% of all of the options worldwide. Of course, it is not available to Americans. I sat down with their CEO, Luke Stryers, to discuss the plans for America, if there are any,

why the options market is so large in other places other than here, and what's coming in the future in the options and futures market as they mature and start to get adopted more by larger institutions this is a conversation packed with endless alpha you do not want to miss it So last time I checked the numbers, I believe Deribit had about 85% of the entire crypto options market locked down. Is that still roughly accurate?

Roughly, depends on how you measure volume or open interest, but it's about that, depending on who you include. But let's say CeFi markets, excluding DeFi, about that. Yes. So it's an amazing number. It's an absurd number. And you're also, when you consider who you're competing against, it makes the number seem even crazier, right? I mean, obviously you have crypto natives.

I would imagine the Binances and the OKExes are the other sort of lead competitors in crypto. But you're also competing with sort of legacy options markets like the CME, right? We're talking about the Chicago Mercantile Exchange, where basically leads probably every other market in the world in options, correct? Massive in Bitcoin futures. so bigger than anyone else, but tiny in options. So yes, we compete with whoever for many years already, including CME, including a variety of local exchanges, global crypto exchanges, DeFi, solutions, etc. But yeah, going strong still. I don't want to take for granted that the audience understands exactly what you do.

Maybe you can give us the very quick TLDR on what Bitcoin and Ethereum futures and options look like, how they're offered specifically on Darabit and which are the most popular products. and which are the most popular products? Sure. Yeah, so we are Deribit. We started in 2016. Sorry. We were one of the first, or actually the first in options, but one of the first overall. So we've been around quite some time.

And we started immediately by offering options in a time where no one cared, essentially. Volatility was too high and no one knew how to price it. So our founder was heavily convinced that the options were at least our game plan. But back then it was too early. So we launched the perpetual. And over time, in 18, 19, options started getting more traction market makers started becoming active

prices narrowed books were deeper and properly priced and at the same time you saw let's say the institutions coming but it weren't the the massive size of institutions but it were firms allocating some some size to crypto so existing firms setting up a game and then starting to trade options. So if you fast forward to today, we are the undisputed number one. We were the undisputed number one back then, but the market was tiny. But now in November, we reached peak volumes. We traded in the overall month, we traded $160 plus billion, out of which typically two-thirds approximately is

options and out of the options it's again depending on the the emotions of the day it's two-thirds bitcoin so two years ago bitcoin and eth those were the days of these uh merge and the flippening and those stories. You remember those. ETH was challenging Bitcoin, but nowadays it's obvious that BTC is the big winner. And the same is visible in volumes in open interest. So we are a derivatives platform. We don't do a lot of other things. So we are purely focused on derivatives and we have a small, let's say 1% of our business is spot,

which is free. So spot is simply auxiliary to our derivatives offering and we have a narrow product shelf. So as mentioned, Bitcoin is two thirds of it. ETH would be the other component. So that's the options component, which is two thirds of the business. And the rest of the business is mixed with perpetuals

as well as dated futures. We are after CME the number one in dated futures, so much bigger than Binance OKEx. And the reason, it goes hand-in-hand with options. So the options market makers tend to hedge with futures. So if you're big in options, you're big in futures. So that's like common sense. Our perpetuals product line consists of BTC and ETH,

inverse perpetuals, as well as linear perpetuals, and we have around 15 or so. This narrower product shelf makes us more unique, more what we call sophisticated. We target sophisticated traders, institutions, people with experience. We are less suitable for the masses. So if traders are completely fresh and new to the space, they typically don't become our clients. We have a smaller client group, but more active. 80-85% of the business is institutional. So we target all the large firms in the space.

And 15-ish percent is retail. So that's us in a nutshell. We moved to Dubai. I'm based in Dubai. And the platform is headquartered here. We got a viral license virus the regulator in dubai of uh covering spot and drifters and we plan to expand the the drifters uh license space with multiple uh global licenses but all but the core is dubai

we talk about institutional adoption of crypto and trading but But I think there's a lot of confusion as to what those institutions are, right? In the United States, when we talk about institutional adoptions, people get excited about microstrategy adding Bitcoin to the balance sheet, right? But I have to imagine at least the early adopters of Darabit, and you can talk to who's using it now, but we're probably crypto native hedge funds who are also institutions at the beginning correct and who's using it now is that where the bulk of your volume is coming from i guess define the institution that's using deribit yeah so the institutions can be many so um we typically don't disclose uh names but all the non-specifically i just mean the bucket yeah so all the big names you read about on the various portals,

they typically trade with us. So let's say in institutional adoption, step one is if they're willing, you buy Bitcoin. So some of them like MicroStrategy do, some of them are afraid. So that would be step two, they buy like a wrapper, like the ETF. So it would be iBit space. Step three would be capital efficiency. So if you have a thousand Bitcoins,

a million dollar exposure, what do you do with it? What happens if the election goes the other way? What happens if whatever those scenarios you can imagine, you hedge? So that's what we typically see. Large institutions, asset managers, portfolio managers hedging on the iBit.

The other side would speculate. So if Trump would win, what could happen to the price? Could it go to $100,000, $200,000, et cetera? They position themselves in a more capital-efficient way. So that would be speculators. Then there would be firms that generate income in crypto. So miners, for example changes that need to pay the bill in in dollars euros whatever tomorrow and next week and they don't know what the price will

be so they sell their income their future income they know that they will most likely mine let's say one btc the next month um they want to make sure that the btc they mine generates whatever x dollars in income so they would hatch. That's the typical type of exposure. Some of them are traded directly, so the people that have direct access. But there's also a few firms that act as intermediary, like inter-dealer brokers, which sell products OTC. So, for example, a large firm that has a client we don't have, they sell 1,000 contacts, and this firm would hedge on Deribit.

So that's also quite a decent part of the flow coming from Asia, coming from all parts of the world, essentially, which use Deribit as a hedge to offload risk. So we are pretty much seen as a repository of volatility, which might be complex, but you should see us as the way to overload positions, either directly or indirectly, and everything is centralized with us, and that's our game plan.

So you mentioned we have 85% of the market, and numbers-wise, depending on, of course, on the price of Bitcoin, that would be like $40 billion of exposure. It's really sizable, which hopefully keeps growing. It grows in dollars. That's easy if the price doubles. Of course, the notion of open interest doubles, but we also focus on growing the number of contracts, which is like the organic growth. So the market is getting bigger and we all expect this trend to continue. So today the market is whatever certain size and

tomorrow it will be bigger because family offices, hedge funds and all those guys will come. In the end, the investment banks will come. So if we talk about institutional adoption, your initial question, that hasn't happened. So regardless, whoever tells them like a very bullish story, the real size is not there yet. The real size is buying the ETF, but also not massively. But they are doing it. But it will happen. The bulk of ETF volume is retail.

That's just a fact. Yeah. And they might buy it via an investment bank or so, but it's still, in the end, is retail buying. But at some point, they will. So firms like BlackRock pushing Bitcoin as a part of portfolios, a certain percentage as a hedge for better diversification. At some point, this mantra gets absorbed by the wealth advisors, et cetera, and it becomes

normal. And once that happens, these firms will also do more and more size. There will be more structured products, there will be more wealth desk executing, etc. And of course, that paves the way for way more drift exposure. For us, coming from years ago, where the exposure

was this, and we're already looking at peak volumes, which are really impressive. I think a few years from now, if we look back at today, it will be much bigger. Yeah, it's difficult to quantify. But if you look at developed markets, the US, multiple markets in Asia, India, etc. If you look at the size of the spot market, the futures market, etc.

Versus the rest of the overall trading equity, etc. There's a ratio. And these ratios differ greatly between countries. But if you look at crypto, it's tiny. So even though we are impressed, and when I mentioned $40 billion of open interest, it is size, but it's nothing compared to what can be done

if markets evolve more mature. Yeah. So take, for example, Tesla stock or MicroStrategy stock or any individual equity that has options offered on it. Like how large is the Bitcoin option market versus spot Bitcoin versus like your average, very popular equity versus the options activity on that specific stock? In the US, options would be bigger than spot. So spot trades, what is it, 1, 2 trillion a month, and the options is, like I mentioned before, we trade, let's say in our best month,

we trade 100 billion or so. It's still at 10. Yeah. Yeah, but still, so it can be, in our best month, the ratio spot will also be much higher. So we're then talking about 1, 1 a half, that's like a normalized value. November was, of course, extraordinary. So the ratio will be lower. So there's tremendous growth. However,

the one thing a lot of people overlook is that, let's say Tesla or whatever, those kind of stocks, they are excessive. So 50 plus percent

of the market is retail in the US. So these options trades, there's a lot of, it is traded by retail. Yeah, so perpetuals in the US or multiple developed markets don't always exist. So Tesla perpetuals are not there. Hence, if US retail or any global retail for that matter wants to trade, in this case, Tesla with leverage, they typically use options. So options is the go-to instrument to get leverage exposure. So in a perfect world where perpetuals exist for all products,

part of the options flow would not exist, but it would be perpetual flow. So often people make the mistake in simply looking at the potential options and saying, look, the ratio is 50x, hence the future will be 50x today. I think the future will be 40x today or 30x today. Still a massive upside. Options are totally different beasts than perpetuals. If you buy long options, you can't get liquidated. So it's a totally different way of trading.

It enables way more precision than a perpetual. You can pick the strike. You can pick the expiry. You can sell, let's say, gold spreads, food spreads, that kind of trading. It enables way more precision than a perpetual. You can pick the strike, you can pick the expiry, you can sell, let's say, gold spreads, food spreads, that kind of stuff. So you can get more tailor-made exposure. If you are a bit more sophisticated, you can trade volatility, which means that the actual prices, et cetera, matter less because you trade like a derived instrument. Options have an enormous additional layer to overall financial markets. So if that's fully unlocked by all of these people

that know what they're trading, the market will grow significantly. Why is that almost a given? Because typically the people that are still to come are not the crypto savvy, the crypto native investors these are institutions that trade whatever that's not today they trade global products they trade fx they trade any any traditional market product and they gladly become converted and they will change their perhaps perception slightly and start including bitcoin derivatives in their overall allocation.

And that means that they will simply do the same stuff that they do with the rest of their portfolio. 99% of it's all the same. So what will they trade? Options and futures. They will position for events. They will position for portfolios. And for all of that trading, perpetuals are not suitable products.

So they are an amazing innovation of the industry, but they're short-dated products. But if you want to position for some event a month from now, three months from now, if you use perpetuals, you're sure to miss out on any target you might have because of the funding element, which will totally distort your P&L.

So it's not a suitable product for that kind of stuff. It's highly suitable for HFT trading, for short-term directional stuff, for news that's coming out five hours from now or one minute from now. It's a perfect instrument, but it's not suitable for longer-term positioning. And all of these people that are still to come, the structure products providers, they create products that expire two months from now, six months from now. You can't do that using perpetuals. They will do it using options in the future. And I think everyone will agree that these people will come. The question is how fast and when, et cetera.

But the road is in that direction. That's why all of us are getting regulated. That's why we focus on quality metrics like ISO certification, SOC 2. It sounds all very boring, but that will unlock that flow. We need to be as secure and safe as possible. And then these firms will come and they will start trading the products we offer. So the institutional growth will come.

The real institutions, the investment banks, I think that will take longer. For firms like Goldman, JP Morgan, et cetera, for them to convert and start trading an instrument and an asset class that in their compliance, their risk, their accounting, all of that audit procedures, all of it is different. For them to really absorb this, this will take time and many management layers and directions

and less statements like Jamie Dimon today made about the sub-ponzi, et cetera. They need to gradually accept it. But at some point they will. I highly believe that. And then they will allocate a team and they will simply copy paste what they've been doing for the last hundred years, which is the structured products, hedging, etc. Perpetual swaps, to my knowledge, are unique to crypto, right? I mean, obviously, we all remember sort of BitMEX innovating on that and then other people running with it. Is what you just described the reason that they have not been adopted in other markets? Are they too confusing for the regulator? Why haven't we seen perpetual swaps, which are so efficient,

at least in the short term, adopted by any other asset class? It's a bit, if you look at traditional markets and the difference per country, but see if these are the same, let's say, family. So see if these are highly successful in Dubai or in this part of the world. They're highly successful in the UK and many other countries. So some part of the innovation of a product that gives you some kind of exposure with a funding fee, even though it's not the same. So the instrument is not identical, but it's like a family member, which has been proven to be successful in big parts of the world.

Also, institutional trading is done using contracts for difference. So it is somewhat successful, but not in the crypto style. It's an amazing product. And the funding element, I think, is missed by many. So if you trade for a few minutes, you don't care. You don't need to know the exact specifications. But if you trade longer, it becomes a very important component. That makes a ton of sense.

Do you think that those will eventually come? Or do you think that it'll just become a sort of a crypto native thing that we have a lot of fun with? It depends on regulator willingness, right? So if we or any of us would go to the regulator and say, we're going to change the world and we're not going to use clearing and we're going to do the... Sam, FTX tried in the US. You've seen the response, regardless of the end of FTX,

but let's say before, there's a lot of resistance in a highly competitive product and a clearing model. No time soon. Yeah, I don't think that will be coming soon. So we talk about, obviously, U.S. institutions. To my knowledge, they're still not available technically in the United States. But can United States institutions still utilize DARE abit through offshore entities? Or is there a structure there? Or literally, is anyone in the United States unable to use Darebit?

Anyone that's a so-called US person, which is more than... So it's not just US residents, but it's like anyone that has a principal place of business in the US. So if your core of your company is the US you can't trade. But what is possible is for US owned entities which set up shop completely autonomous in whatever Singapore they can trade. Yeah that was my assumption. Completely segregated and there's no involvement from the US. Right. So the traders can't be in the US, the people creating the algos can't be in the US, the people creating the algos can't be in the US, or anything the people doing the operations can't be

in the US. If you completely segregate and you allow the offshore unit to operate completely remote, then it's permitted. And we are very strict, so you have to sign access statements, you have to confirm. So of course, after bid-mix, bindings, etc., we don't want any problems at all. So we're

extremely conservative. As well you have to be, but that speaks to the potential of the market that you mentioned before, because we all know that the bulk of options on every other asset is traded in the United States, right? And so that leads me sort of down a couple paths. One is we're seeing now options on IBT and Fidelity's ETF and others. And I think eventually probably will come largely to all the spot ETFs. Do you think that that is what the Americans who are looking to adopt the strategies that you're talking about will end up using? Because they're not using the CME to any huge degree, because usually that means hedging against spot exposure, and most of them aren't buying spot Bitcoin, right?

They might buy the ETF. So does this sort of become a segregated market of institutions who don't really care about the actual spot asset holding Bitcoin itself or hedging against it, who use the ETF as a proxy and then utilize their strategies on the ETF itself? Forging against it, who use the ETF as a proxy and then utilize their strategies on the ETF itself? For now, it does.

So these people can't access. So in the US, it's an access game, right? So a lot of people can't access the CME as easily as they can, let's say, Tesla. Now, iBit options or the ETF options are equally accessible like Tesla options. So of course, the space opens up and the same people that trade Tesla, let's say 50, 60% retail, have the ability to trade hybrid options. You already confirmed the ETF options is typically bought by retail. So all of the hedging and all of the stuff we talked about earlier can become applicable. Will it be an institutional proxy of the

real thing? Don't think so. There's fees involved. Not all firms have the same mindset. So some firms are terrified of crypto and rather have like a wrapped crypto because then it's just business as usual compared to others.

Insured, they feel like it's safe, it's on an exchange that they trust and are familiar with. That makes sense. But there's also plenty, I think the US has something like 20% of the US citizens own crypto one way or another. This crypto is

held by larger firms. These firms have thousands of BTC and they want to generate yield. So on top of Bitcoin, they want to trade and they promise their clients yield. And you do that, or part of the solution would be, for example, staking. But the traditional way of doing that is trading options. You sell out of money options, that kind of stuff. In that case, if you go to, let's say, CME or Nasdaq or whatever, and you say, or the brokers involved, you say, look, I have a thousand Bitcoin, you're not welcome.

So these firms can't trade that typical model or their preferred model, and they would come to us. So firms with crypto, they can only trade using that crypto platform on a venue like ours and not on any of the US markets. So yes, I think it will be partially successful, or already is successful, so people will trade the option. I think flow in the end begets flow. So more and more flow that is traded, one flavor here, the other flavor there, generates all kinds of arbitrage strategies that

didn't exist before, until the second market started, which in our case, or at least for now, favors us. So people sell in the options in the US and they hedge on there. But so there's all kinds of flows where access becomes a key determining factor. So some firms can trade two markets and of course they will have the ability to trade differently and some firms can only access one. For us, we have way more market makers than in the US. The hurdles to access are much lower. We have small traders. We have two guys in the garage who can trade

highly successful on the crypto venue, but they wouldn't be able to trade on CME because of the capital requirements, because of all the regulatory requirements. And they can trade on there. So in terms of liquidity and in terms of access, we have much more. And if you're the guy that can do both, of course that will generate new trading strategies. Then one is in dollars, one is in crypto, there's an FX component, there's a weekend component,

so markets will close while we'll never close. So there's collateral requirements. So it's a smart game. But if you play it well, you can generate additional volumes and additional returns. And that's what all of this unlocks. So we don't see hybrid options in the US as a threat. For us, the US has never been an exit game anyway. So these people in the US, this retail market that

is able to trade now was not able to trade yesterday. And if part of that flow, even though it's only 1%, if part of that flow has some benefits, we gain 1%. So we're happy. I never really thought of it that way. I mean, obviously it's the idea that a rising tide lifts all ships, right? And we see that in markets across the board. But for you specifically, actually, if we start to see massive adoption

of options on ETFs, that could open other arbitrage and hedging strategies for people who have access to that, but then see some sort of inefficiency between that market and Darabit and can make money arbitraging that gap. So it actually, the more markets, the better for you, especially because you're leading already. I would have never thought of it that way. The latter is important.

Of course, if you're tiny, you're not going to see the benefit. So we have to keep our leading position. With size. Yeah. That doesn't work for a thousand bucks, right? If you're talking about a few bips in efficiency that somebody needs to take advantage of and there's fees to worry about, they have to be moving

massive size. Even though it's a few bips, if you want to offload that, you're not going to offload it on the small, smallest venue. So we have to be dominant in terms of slippage, right? You have to have deep liquidity,

right? I totally understand that. So any maturing options market basically is a massive benefit to you anywhere in the world. But the next question, obviously the obvious question is where in the midst of regime change. Right. We've seen Donald Trump appoint pro-Bitcoiner after pro-Bitcoiner after pro-Bitcoiner. We know that the regulatory assault on the industry is likely to at least diminish, if not die completely, with Paul Acton's coming in at the SEC, likely Brian Quintenz at the CFTC, I mean, you have Besant at the Treasury, right? I mean, it's almost like a fever dream when you see what's

happening here. But does that mean that you've changed your strategy as to how you intend to approach Americans? Is there a path now that didn't exist before for Darabit to become regulatorily approved in the United States? And was that something you were working on before there was regime change and hoping for it? Just what was the status, I guess, over the past few years of trying to enter the American market? And how much has that changed now? If you look at the success in the over the past years in markets entering the US, it's all spot driven. So no one has actually been successful in the RIF display. And so for us spot is tiny

or almost irrelevant. So for us, the US has never been big on our agenda because we knew the CFTC wouldn't let us or anyone else approach the US. So for us, we're hands off in terms of US access. Trump is a potential game changer, but

the game will predominantly change for the US market. So you can imagine, whatever, Coinbase, Kraken, Gemini, those guys, anyone with a US mindset, they will do well. So whatever their problem is, the problem will become less tomorrow. And part of the problem could be derivatives, so there will be more opportunities for them in the US. Will the MAGA mindset open doors part of the problem could be derivative so there will be more opportunities for them in the us will

will the the the the maga mindset open doors or for us not not that easy because that's exactly what trump is trying to uh prevent all the terrorists etc it's it's it's about the us and it's not about helping there a bit uh it would be great but that that's not of you know part of his game so you think he puts a wall around the American companies that are trying to adopt the space without allowing others to sort of enter? I don't. So I think in the end... Seems like you just opened an office in New York City. No, not New York City, in Texas. You know, maybe they view you differently. I think there's two answers to the question. So one is, let's say, overall is going to ring fans. He might. He will favor the local markets, employment, et cetera.

And will he open the door to buying his OKEx in there? Why would they? They'd rather see the employment go to their constituents than the foreigners. So that's part one. If you look at us, we are 85% institutional. I think lifting the problems for the institutions slightly might open some doors if they simply say, look, you can do whatever up to X, whatever X is.

It makes their life easier and less restricted. And they might be easier permitted to access the markets outside of the US. So that's one opportunity. The other one would be us registering the US. So there's stuff like a foreign board of trade, which is offshore markets that can, let's say, whitelist a product for US persons. That's not so easy because, like mentioned before,

we have an integrated clearing model. So for us, the market, we are essentially the full vertical. So in the US, we have the broker, we have the FCMs, the DCMs, etc. All of it combined or in layers, that's like, let's say, the overall market. For us, we're everything combined. So we

are the broker, we are the platform, we are the clearing house, the margining house, we are the settlement agency. All of that stuff is one entity. And that model doesn't exist. So if you go to the US and say, can we offer our services? They wouldn't allow that here, right? You would have to find a different custodian, a different broker dealer.

You'd have to have 47 new licenses, purchase different companies that already exist. Right. So that's part of not only our game, Ben. I think multiple exchanges are looking at it. Should we do this? And especially the clearing model is the difficult component. Who should clear it? Should it be a US clearing house, an offshore, et cetera, et cetera? All not easy to address,

but I think those are the opportunities being reviewed overall in the market because I think people will see the US as an opportunity, but not like an easy one. It's not in the beginning when Trump started winning and Price started rallying everything. Wow, now it's up to the sky's the limit. I don't think in reality it's like that. But it will open new opportunities. Perhaps we don't see them that. But it will open new opportunities.

Perhaps we don't see them yet, but it will open new doors. That's what I do believe. So you would literally have to chop your business into pieces and partner with like a DTCC or ICE or even CME Clearing or something like that just to even be able to operate in the structure that exists here. You just have a fundamentally different structure. Or have the U.S. accept our structure, which will be a challenge.

Yeah. Especially after all the, I mean, the very fact that your crypto already is like a scarlet letter, we all know, no matter what happens and when we saw what Sam tried to pull off, to your point. Right. FTX, pretending that they were like a registered custodian didn't do anyone favors.

No, I think the message he tried to convey was genuine. In the end, the model that, let's say the crypto model, where we have 24-7 trading, where we have real-time risk management, is a better model.

I do believe that I think any of you would agree. And capital required is less. If you never close and you can act immediately and we don't have to wait for margin calls to come four, eight hours later, of course that's a better model. It's real-time and the pain is much smaller if you can take it immediately

than have to wait until someone wakes up. So the model is strong, but the one selling it isn't helping it you talked about all these various strategies obviously that people are using on derebit i think one of the biggest ones that maybe there's some confusion around or that you just keep hearing thrown around the carry trade cash and carry trade carry trade we know that uh it was a bit of the widowmaker on GBTC last time, but that was because people's Bitcoin was locked in grayscale. So it's a different trade. I just

want to put that out clearly because every time I talk about the carry trade, people say that blew up the industry last time and that blew up the industry because you didn't have access to, you were locked. And when something goes from a premium to a discount while you're locked, you can't react and do anything. So that's why it was kind of a win maker. But how much do you see people, first of all, I guess, structurally right now, are futures sort of just perpetually in contango? Like, is there a hope? Is there always an assumption that Bitcoin is going to be higher when there's any bullish sentiment?

And does that just allow this sort of endless yield from the carry trade while that exists? Is it always going to be in contango? No, you've seen that in the past. I mean a bull market sorry like right now there's the expectation that we remain in contango. Even outside of the bull market it's typically in contango as well but then yes today I'm just looking at it now it's 11, 12, 30 percent annualized approximately, which is essentially almost free money that you can grab. Based on which contract? Just so people understand. You say 11%, 12% annualized.

The way it works is, at least on Deribit, you have, let's say, dollars. You have USDC and you buy BTC and you sell the BTC future in a certain expiry. If you look at these expiries and let's say a product expiring tomorrow, the yield would be slightly higher. But if you look at three, six, nine months from now, today, the yields are approximately 11% annualized, 11, 12. That means that on your $100,000, you can make 12% guaranteed. And it's really guaranteed.

Whatever Bitcoin does, so it could rally to $200 200 000 or it could crash to 50 000 it's irrelevant you will get your 12 yield unless the market fails so you take market exposure but you don't trade bitcoin exposure it's an amazing trade a lot of people do it and uh i think so for us we were looking at creating like an easier button just to say look lock in this yield like yeah like what one click strategy to it that will automate it buy you a hundred thousand in bitcoin and buy and sell you that contract and you're done and it would lock it and you have to you can unlock it of course uh because you said the gbtc trade it was locked in our case you can unlock it but during the's say, your exposure to three months,

it doesn't mean that your yield one and a half months from now would be half of it. It could be different. But at expiry, it will be 12% annualized. So that's a given. So if you unlock in the meantime, you could be better off or worse off. It depends on the market sentiment. But at expiry, you will have 12% guaranteed annualized.

So you have to make sure you're not locking up Bitcoin that you're going to need to sell if things go wrong. Yeah, of course. You need free money, essentially, that you're not going to use. Or you should be willing to take the pain should you really need it. Right, but if it was Bitcoin that you were going to trade, for example, if you're at 100 and like your stop

loss would have been 95 and bitcoin goes to 50 uh and you're there yeah you made your 10 or 12 thousand dollars but you now have bitcoin that's worth half that you were not basically able to sell you could have by the way you can unlock i'm just saying in a vacuum yeah so if the if the market um let's say drops your your bitcoin worth half, but your short future is worth double. So in dollar terms, the position total would be under 12,000. But in Bitcoins, let's say it drops 50%, you would have roughly two. And your mindset might have been different. You might have wanted more or less.

But in dollar terms, it's a given. Now you can buy more Bitcoins at half the price with your profit. Yeah, but if the market rallies to a million, you're lost out on that opportunity. So there's zero chance you will participate with a single dollar of that upside because your upside is capped. But for many people, it's fine. So 12% is an amazing yield. If the bank pays you, if you're lucky, you get whatever, 4% or 5% if you're lucky.

And this trade would give you 12%. Is the trade the same if you're buying BlackRock Spot and shorting their futures or are the numbers different? The numbers are different. So if you short the CME futures, the margin requirements are different and the yield would be different as different. So if you're sure to see me futures, the margin requirements are different and the yield would be different as well. So typically on offshore markets, the basis is slightly higher. So let's talk about five, ten years down the road. Let's put reality aside and say in your best case scenario, Bitcoin becomes a legitimate asset. As you said, everybody owns 1% to 5% of their portfolio is put into Bitcoin. And we have a fully mature options

market and futures market that looks like any other asset class. What does that look like for Darebit? And how do you effectively plan and prepare for that future coming? Is it more products? Do you start offering altcoins do you start offering spread products ethbtc spread you know like what kind of things i guess are you looking at uh with the perfect scenario in mind so i don't think the perfect scenario will will just happen i think the perfect scenario is partially made by us If you believe that the market is going wherever, let's say a million dollars upside. This million dollars means that, whatever, let's make up a number,

10,000 firms have to access the market. And these 10,000 firms, hedge funds, asset managers, are highly regulated traditional firms. They can only buy, let's say, Bitcoin or Bitcoin derivatives if all the boxes are checked. So in order for the coin to rally to a million,

they need to be able to check the boxes. And until they check the boxes, the coin won't rally. Let's say box one is an ETF. Box two is stuff like certifications. It's regulatory stuff. We need a license. We need a MIFID license. We filed for MIFID in Europe.

Without the MIFID license, these guys, let's say, out of 10,000, 2,000 would be from Europe. These 2,000 firms can't trade Bitcoin derivatives on any market as long as you don't have the license. Then if you have the license, you need all of the financials. That's quite a hassle. We have four years of all of the financials. You can't imagine the drama it takes to get all of that stuff done. Many markets don't have this. So all of them don't classify. We need

it. We highly invest and make it all happen to get the audited financials. You need ISO certificates. You need SOC 2. SOC 2 is about security. We just got like another CCSS protocol which is about wallet security and how you manage private keys and all of that stuff.

All of that stuff needs to be done for these 2,000 or 10,000 to start trading. And once they can, the coin can rally, of course. The more it becomes successful, the more regulated it becomes. So it's a self-fulfilling prophecy. And we like to take part of, let's say, the growth map by enabling that. We're looking at South America. We're looking at Asia. It's a highly regulated model. Anyone, or at least in my view, that thinks the original mindset as in crypto against

Wild West. Yeah, the Wild West. And we're going to, that line of reasoning will fail. The governments won't allow it. The regulators won't allow it. And the capital won't allow it. The capital won't flow to those kind of markets. I laugh.

I laugh because I remember when I first started trading. Yeah, I came from trading. I came from DJing. But I came from trading other markets into crypto, right? Because of these unicorn pumps and this crazy stuff you'd heard about and all this volatility. And because, and this was conversations, you know, I went to the University of Pennsylvania. My friends are like at Goldman and Morgan Stanley and this was conversations, you know, I went to the University of Pennsylvania. My friends are like at Goldman and Morgan Stanley and everywhere.

And my conversations, even with these guys was, holy crap, like crypto exists in its own world. You don't even need to pay taxes on this stuff. Like even guys that worked at Goldman thought at that time that we could just go do whatever you want. And it didn't matter until maybe you came out back into cash, right?

Like your altcoin trades didn't matter. You were losing Bitcoin, whatever. That whole mentality is dead to your point. But there's still probably thousands of non-KYC exchanges with anonymous CEOs all around the world making billions of dollars in crypto. How? Is that just a flash in the pan that eventually sort of gets arbed out in regulatory as well? We saw it with the ICOs. There's plenty of money that went to these scam ICOs. I don't think these people will go to jail.

They simply got away with it. So it's a temporary thing. But it blew over. So the NFT hype has changed. But I'm not even saying these exchanges are scams. They're just clearly not concerned with regulation or they're registered somewhere. But there's plenty of Americans using non-KYC exchanges

with VPNs all over the world. Yeah, and DeFi solutions and that sort of stuff. But if you believe that we're going from here to here, this roadmap will mean that that stuff ceases existing. But that doesn't mean they shouldn't do it today. But they have an amazing business case, and they most likely will get away with it. But it will die out.

Look at the number of platforms before FTX and after. Look at the allocation. The large firms traded 100 markets. After that happened, they traded 20 markets or 10 markets simply because they got burned and they won't get burned again. The same, these firms will get penalized. They will get whatever. As you see, some regulator globally will fine them.

They will stop or they get hacked, and then it all blows over. But in a new platform today versus a few years ago, it's way more difficult because the level of trust is not there. The risk management systems are not there. The people, it's more difficult. But it's a phase. But I believe that if you go towards whatever, the million dollar Bitcoin, whatever that might happen,

this stuff will cease to exist. And the number of players will be smaller that facilitate all of it. And we will be hopefully one of them, but we won't be the only one. There will be multiple, but it won't be a massive list as today. It will be a short list with way more clients. And all of these clients feel comfortable, like they do in regulated market, because they know it's properly arranged, because they know it's being audited. They know that there's financial people

looking at it. They know that the proof of reserves are there. They know that the coins are kept secure and safe, etc. All of that is a requirement for these people to join. I guess BitMEX is a perfect example. They were the only gig in town at that time. I think they were doing at one point like $8 billion in 24 hours or something. And that's gone. And listen, they've gotten, I think, compliant and they've learned the lessons. And, you know, it was at a time when it was the Wild West. But I think that's probably like a cautionary tale for other exchanges, you know, in the future as to what happened to that. Look at the landing space.

The landing space is insane. Look at all of these. Yeah, Celsius and, yeah. All of them. If you look at the size, there's some calculations done about pre-Genesis or post-Genesis. It's something like $20 billion

in freely available capital, and now it's two. So $18 billion or more is gone. Also, that phase is gone. So the capital is more scarce and it won't easily come back. And once it comes back, it will be more prudent

and the LTVs will be different. It will be the same thing. But, Anne, to your point, it'll come back to State Street and Bank of New York Mellon and it won't come back to Celsius. That's really the answer, I think, is that the incumbents, the trusted institutions that

Bitcoiners obviously hate, that's where it's probably going to land if it happens in size. Or there are some believers that think that DeFi could take all of this. I think the DeFi will play a nice added value for people, but the trust is less relevant. So for you, if you need a bony or whatever, those kinds of names, and you're allocating a billion dollar, you're not allocating a billion dollar without a hundred checks in place. And you want reports and you want people

and you want whatever, all of that stuff. Insurance. I'm telling you, that's the big one. If you allocate a thousand dollars and you're going to get 5% extra yields via a DeFi solution, I think it will work. I think people will keep on using it. Yeah, that's why I think that...

No one to call. Yeah, no one to call. But there's a certain part of the market that will always like that there's no way to call and wants to see the smart contract and do it. But to your point, it's very hard to imagine that they end up in size competing, at least initially,

with the Bank of New York melon types. But when you talk about these other exchanges and how eventually they'll probably go away, but it's probably OK now, I think it is OK now. I'm not saying OK morally or legally, but they're OK businesses now because we're still at such a small percentage of the global population that isn't even interested. And they can have thousands and thousands and hundreds of thousands more retail traders with small size still sign up and make billions of dollars

without ever even having any institutions or any huge size or ever even being on the radar of the United States regulators. Yeah, but forget about the US. Just the concept, for example, just the concept of DeFi where it's completely trustless. If the protocol is proper and everything is like properly checked and the protocol simply does something that it's programmed to do, it's an amazing solution.

You don't have to trust anyone. But before that solution is adopted by, let's say, Goldman and their army of people reviewing stuff, they have a thousand questions or more. They have all these digitality forms. They have all their standards that they have deployed to hundreds of different markets and OTC parties, and they will keep on doing it every year. And those are their jobs.

That's their life. And they're not going to say, okay, fine, this DeFi solution is pretty nice. We're going to ignore all of our policies that we've drafted over the last decades, which are approved by all the regulators. They simply say, look, this doesn't fit the box. Yeah, that makes sense. So stepping out of your role as the CEO of Darebit and, you know,

talking about all the products you can offer and all the things that are coming. And let's talk about the market just for a bit, right? You obviously have been in crypto for a very long time. You've seen the cycles. You've seen all these washouts. Where do you think we stand here sort of coming into the beginning of 2025 as far as what's likely to come?

You don't need to give me any specific hyperbolic price predictions, any of that. But, you know, are you feeling like it's happening? The tailwinds are here, that we're entering a monster bull market, as many do, or are you proceeding with caution? I mean, what's your general feeling on the market? I think today, I'm not sure when you're airing this, but today is risk off.

So this period will last perhaps until Trump. Some people are keen to see what he's going to do and going to announce the first days. But today, global markets, AI, Bitcoin, et cetera, is being sold as it's seen as a risk on profit. So it's simply being bucketed with the rest. There's no macro theme. There's nothing negative about Bitcoin. I don't see any negative headlines. So it's simply part of a risk bucket.

Yeah, this won't come out for at least a few days, but we're recording on this on January 13th, so people know. And Bitcoin dropped below $90,000 for the first time in a couple months today. DXY hit 110, and 10-year yields in the United States hit 4.8%, I think, this morning. This is a macro story and nothing. I love that Bitcoin is generally an uncorrelated asset, but no asset can hide when the Fed's cutting and yields are still raging.

Exactly. So it's simply a victim of global macro trends. And will it continue tomorrow? It could be. Will it be 80,000? Extremely difficult to predict. But I don't think it's like now is like an amazing moment for risk assets. However, I do think that Trump will change the game.

So I do think, and not necessarily him him but the people he's appointed will gradually change the landscape and that will open up more doors than it will close so just assuming that the doors the net doors opened will generate new income or new inflow of money and the coin will recover what the price level will be i don don't know. I never do any predictions, but it will be higher than it is today. That's my personal conviction. Will it be there at the end of January? Don't think so.

This will take time. So will it be Q1, Q2? Could be. I think it will be positive. If you look at positioning in the drifter space in our market, it's longer-term positioning. It remains bullish the basis we talked about earlier is still bullish it's it's the basis is the reflection of market

sentiment it's still positive so it's a temporary risk uh adjustment but the overall um flavor the the sentiment is still positive if you look at volatility it hasn't exploded so people simply think this is it will be like this for a while. And then there's upside momentum. Will it double to 200,000 overnight? No, the market doesn't expect that to happen rapidly. But the chances of Bitcoin rising, I think are higher than that of farming.

So I think it's still bullish. It's positive. The sentiment is still positive. I talk to a lot of people all day and no one is like panicking. It's a temporary correction, I think. And it's a macro thing, but there's no problem. I mean, looking at Bitcoin specifically, I think it's like peak to trough is 17 or 18%, maybe below 90 from the highs at 108,000 when we're talking now, 30% as usual. I think most January candles actually have a 30% spread. This is not the most bullish month necessarily, and you tend to see these huge

retracements in a January, but that's good. I mean, it's encouraging. You have the data. So let me ask you this. What's the most popular end of year contract being traded? If you have that data on price on Bitcoin, what's the biggest bets people are making on the price of Bitcoin at the end of 2025? Or maybe even, I don't know if 2025 as December is the best benchmark, but. Yeah, I have it in front of me. So in terms of open interest, it's still relatively small because we didn't open it long ago. So we have up until a year outstanding. So we're just in January. Yeah, it's still relatively small because we didn't open it long ago. So we have up until a year outstanding.

So we're just in January. Yeah, it's brand new. For two weeks. So it's limited. But the biggest contract for December is 200K. So it's gradually being positioned. We have limited exposure thus far. So it's not a massive contract.

But it tells a tale, right? It's upside positioning and the longer from today, so if you look at let's say tomorrow's expiry, there won't be 200,000 contracts or open interest, so it will be whatever, 100,000. It typically is always close to the price level but the further uh away from today that the volatility uh of the price makes those stories more uh possible than than this kind of stuff happening so you would typically expect the higher strikes to be in the further outs um and it's too small to be of any significance so people shouldn't conclude anything based on this, but it does indicate more bullish momentum overall.

And typically, crypto is more bullish than traditional markets. So if you look at Bitcoin, it's a different... People don't generally anticipate the stock market to double in a year. And crypto, that's a pretty common bet. Yeah. So the typical ratios are already bullish, which is kind of strange, but that's simply a fact of life. So the clients and especially retail, that position for it's like a lottery ticket. So they think, look, I buy one option and if it happens, it happens.

And then and so and many people made a lot of money by doing this because we've seen like an amazing revenue. Because I want to ask you just sort of a pragmatic question because you have a lot of like retail traders or traders that like to look at option flow to determine what they should be doing in the market now or what the general sentiment is. Can you just give like a very basic idea of how your average person who wants to understand options positioning and what's coming and how the market is viewing things, how they can just kind of quickly take a look at your data or any options data and to give them sort of actionable intelligence? To determine where the market is, I think the easiest way to do it is looking at three things. So options, options price is determined by the time to expire. So how long, it's like an insurance policy. How long does the insurance policy cover?

And of course, the longer it takes, the more you have to pay. So that makes sense. Of course, strike, what are you insuring against? Are you insuring only, let's say, water or also fire and whatever? The more you insure against, the more premium you have to pay. But the most important one is volatility. So volatility is the expected move over time. So if the volatility is high, the bigger strikes and the bigger drops

become more realistic than if the market never moves. So if volatility is high, and we have a gauge for that, so we call it default, it's like VIX, but then for crypto, if it's high or low or relatively high, you know that options are expensive or cheap. So you know that when you're buying a call at peak volatility level, you know that you're paying a lot of money for an option. If volatility is very cheap or low, then you know that it's an interesting moment to buy. So it doesn't mean that if you're buying it at peak volatility, there's a wrong move, but at least you know that you're paying top dollars for the option. So that's, that's no. Secondly, we talked about the basis. It's always good to understand

how the market looks at the future. So always look at the basis, which is like an indicative indication of what the market expects. So if you think you're bullish, at least it's nice to see whether the rest of the market also has the same view or whether you're the only one and the market is in backwardation, you have to be a little bit more conviction than if, if, if the market is looking very good. That's when you smash, that's when you smash it.

You're the only, when you're the only bull left, that's when you smash it. Come on. Yeah. Yeah. You can make an amazing trade, but you have to know that you're the only bull left, that's when you smash it. Come on, yeah. Yeah, you can make an amazing trade, but you have to know if you're the only bull left or whether there's a loss. Yes.

It gives an indication. And the third one, I would look at the skew. So the relative pricing of options, calls versus puts. So if the calls are very expensive or normally expensive or very cheap, it also gives an indication. So if Q changes, that's like implant volatility of calls and puts compared.

So forget about all the complexity, but if the number is trading in a certain direction, so normally it's like, let's say in line, if it significantly moves in one direction, you know that calls are being bought

or sold so if they're sold to sold for a reason if they're bought or bought for a reason so it again confirms the sentiment so if you have these three you know at least where the market's at and then if you're a believer of technical analysis or whatever that kind of stuff it adds another layer but at least do your homework and And of course, look at whatever. We have free courses, but there's plenty of YouTube. Options are a bit more complex than anything else. So you shouldn't trade it, especially because of volatility. You can have the direction right,

but if volatility moves the opposite direction, even though the market rallied in the predicted direction, you can still lose money. So you have to be way more careful with options than with spot because all of these metrics don't apply to spot. So it's a more complex product. Make sure that you understand what you're doing,

but look at these metrics and know when you're buying or selling what the rest of the market thinks and how it's being priced. So then at least it gives you more conviction. And then if you're wrong, you can at least understand why you're wrong and why you lost money instead of just being at the mercy of the market.

Love it. I love ending with a little bit of actual actionable advice to help people. Look, we often get into these very deep conversations that are probably over their heads, but it's nice to just say, hey, this stuff is useful even for you if you're just determining when to buy or sell spot. You could tell what's happening in the market. You don't have to care about options. At least you know, for example, our expiries, the big expiries, like

the December year and the quarterlies, they do impact markets. If you look at the options market and the big expiry, you know that's going to happen tomorrow. Just be a bit more careful with your trade, even though it's a spot trade. If you know that the market will be expiring, perhaps you should wait until after the expiry. Yeah, it makes perfect sense.

We love to see those Bloomberg articles, you know, the triple witchings and all the big expirations that we hear about. Nobody knows what the hell they're talking about. Luke, really a pleasure. Where can everybody follow along? I know you don't use X very much, but where can people follow you after this? We push a lot of content on X.

So Deribit Exchange on X, LinkedIn, and we have a portal called insights.deribit.com. So we publish a lot of insights, stories of what's driving the markets. So you can easily follow us there. I would love to have, of insights, stories of what's driving the markets. So you can easily follow us there. I would love to have, well, it's above your pay grade,

below your pay grade, I should say, but I would love to have you or somebody from your team come on my shows more often and just kind of keep us updated as to what's happening with the option flow and sort of maybe present some of this data. I think it would be really helpful. During the bigger expiry. So let's say the year end,

those numbers are big. The March one will be big. The June one will be big. And sometimes, let's say the Trump one. So we introduced the Trump expiry earlier. You see people positioning.

Of course, it's macro, not really macro driven, but political driven. But it's those kind of moments are interesting to look at the data. Perfect. Luke, thank you so much for your time, for your extra time, I should say. Really a pleasure to finally connect.

I know we met, I think, in Dubai in the past, but to actually get to sit down and have a recorded conversation after all this time. And I really would love to have you back soon. Gladly, gladly. Thank you so much, Luke. See you soon. Thank you. Cheers.