• Cryptocurrency derivatives have become a key area of investment in the crypto space.
  • Laura Vidiella del Blanco with LedgerPrime is an advocate for crypto derivatives platforms.
  • While there are benefits to derivatives, there are also notable dangers.

With the continued rise in support for cryptocurrency, the crypto derivatives market has seen significant interest in recent years. Derivatives platforms were created as a means of navigating the risks of crypto, however, recently they have become exceedingly relied on to assess and predict the price of cryptocurrencies. This is particularly important in a market where volatility is at play.

In a study titled, ‘Cryptocurrency Derivatives: The Case of Bitcoin’, researchers state that, “Cryptocurrency derivatives are used to hedge against and benefit from price movements.” Derivatives, it states, are widely used as a means of addressing the risks of crypto. However, crypto derivatives have faced criticism, as many cite them to be dangerous. In fact, in 2020, the UK FCA (Financial Conduct Authority) banned the sale of crypto derivatives to retail consumers.

LedgerPrime is a global multi-strategy asset management firm, implementing strategies in the digital assets space. Laura Vidiella del Blanco is the VP of Business Development and Strategy at LedgerPrime, and has spent years working on building crypto derivatives infrastructure with feedback from current institutional and retail customers.

As crypto maintains itself as a player in the global economy, it is important to assess the risks, successes, and information available to the average consumer.

What are Crypto Derivatives?

Crypto derivatives are contracts or tools that gain value from an existing asset. This existing asset can take the form of any crypto token. Parties enter into a contract, and predict the future price of that asset. The purpose of this prediction is to sell or buy crypto assets on a particular date. Subsequently, a party involved can benefit from this contract by selling their asset at a higher price, or buying assets at a lower price. This is dependent on the changes in the asset price for that date.

Types of Derivatives

There are different types of derivatives in crypto, and they vary in popularity. The most used types are:

  • Futures - This particular contract is an agreement between parties that an asset will be bought or sold on a specific date, at a specific price.
  • Options - In this type of contract, parties have the choice to buy or sell assets on a specific date and at a specific price. Here there is no obligation to go through with the purchase or sale.
  • Perpetual contracts - This type differs from Futures and Options, as it does not have a set date or price.
Laura Vidiella del Blanco
Laura Vidiella del Blanco Laura Vidiella del Blanco

The Benefits and Dangers of Derivatives

Crypto derivatives have their own set of advantages and disadvantages. In terms of their advantages, derivatives are used for risk management purposes, and as a result, possess low costs for transactions. This means that it is ultimately a less costly form of trading. Similarly, derivatives allow participants to transfer risk to other parties. This mitigates the potential for loss.

There are, however, dangers and disadvantages when using crypto derivatives. There is a lot of risk involved when dealing with derivative contracts, as they are subject to the volatility of the primary asset. In conjunction with this, derivatives are speculatory, and could result in the loss of large sums of money. This is an expected burden within a volatile market.

Laura Vidiella del Blanco and LedgerPrime

Laura Vidiella del Blanco has been involved in the trading side of crypto since 2017, and has narrowed down her area of expertise to crypto derivatives. She started out working at LedgerX, and moved on to Paradigm, the largest institutional network in crypto for OTC electronic trading. Since then, she has gone on to grow the derivatives market at LedgerPrime, in particular their OTC options desk – which has grown by 120% since she joined the team in January of this year.

She moved to LedgerPrime to continue the development of derivatives, but with a larger variety of digital assets, including more complex products such as structured products and exotic options. Vidiella argues that whilst some traders think that a traditional background in finance is sufficient for success in the crypto space, there is, “an added value of having crypto native people take the lead on this role.” This is because they have a better understanding of both markets’ dynamics (traditional and crypto) and the role played between onshore and offshore exchanges like Binance, FTX, Deribit, CME as well as with electronic trading platforms like Paradigm. In addition, when pricing crypto options, models like Black Scholes are hardly effective. There are many new variables to look into with the rise of DeFi and new products like perpetuals. As such, OTC desks like LedgerPrime’s build customized models where we constantly adjust or add new variables to match market developments. This can only be done by having a solid understanding of both sides of the market.

At LedgerX, Vidiella worked closely with the VP of Sales and Operations, Alexa Dexter. As a result of their collective work, the platform grew 20 times its size in just 12 months. Whilst there, she actively campaigned for information transparency amongst all levels of investors. This is no surprise, considering many of those invested in the success of crypto and derivatives are adamant for the decentralized nature of the economy.

According to Vidiella, she had her sights set on LedgerPrime early in her career, but decided to garner a thorough understanding of crypto and derivatives before pursuing the company. Now, by working there, she believes that she can add significant value to both the derivatives market and the company, which has already produced 120% of its 2021 OTC volume in just under three months.

Like many in the financial industry, Vidiella was disillusioned with traditional financial systems. She decided to enter the crypto space as a way of pursuing a fair, secure and better economic structure.

With LedgerPrime, Vidiella aims to revolutionize the crypto derivatives space. LedgerPrime has consistently ranked within the top 15 crypto native funds by AUM, and works with diverse and global counterparties – family offices, exchanges, traditional finance entities, and more.

Final Take

Even the most traditional investors like Warren Buffet who famously likened cryptocurrency to “rat poison” have now invested around $1Billion in a crypto friendly bank. As the general public becomes more aware of the phenomenon, derivatives platforms are gaining popularity as risk management tools. When dealing with a market that holds significant volatility and risk, it is vital to assess the benefits and dangers of that space. Laura Vidiella del Blanco is one of the few players in the derivatives market whose pioneering efforts may leave a legacy. The cryptocurrency market is no doubt highly volatile and no matter the extent to which it is promoted, any investor should approach this space with caution.