Smarter than Telegram? Encrypted derivatives platform pushes communication platform for large transactions

This article is compiled fromThe block reports, Original Author: Celia Wan, Compiler: Odaily Aloe Vera

Encrypted communication platform Paradigm is seeking to replace Telegram to promote over-the-counter options/futures trading (OTC).

Paradigm, an institutional-grade communications platform, partnered with Deribit, a digital currency derivatives trading platform, on Thursday to provide digital currency derivatives investors with a joint block trading solution.

This solution allows traders to trade bulk orders of Bitcoin (BTC) and Ethereum (ETH) options and futures through Deribit through the communication interface. Despite just launching, it has already enlisted the likes of Singapore's QCP Capital and cryptocurrency bank Galaxy Digital as clients. The first test transaction was also conducted at QCP Capital.

Currently, no exchange offers block trades in crypto derivatives, although block trades are common in traditional stock trading. Institutional traders can only negotiate large transactions directly through Telegram or Skype, and then manually execute the transaction on Deribit.

Up to 50 percent of all over-the-counter (OTC) cryptocurrency options trades take place in a Telegram group chat of dozens of traders, industry sources say. When a trader wants to make a deal, she manually makes an offer to the group, and if a counterparty is interested, they enter a private chat room for bilateral negotiations.

Founded by former oil and gas over-the-counter trader Anand Gomes, Paradigm aims to address the opaque nature of market transactions and lack of automation. It provides a Telegram-like automated operation platform,Allowing buyers and sellers to send information on its chat platform, institutions can directly quote and communicate with their trading partners for derivatives through Paradigm. After reaching an agreement, the transaction information will be automatically submitted to Deribit for execution and liquidation. Investors do not have to execute trades manually on Deribit.

“(Paradigm) is just pushing what’s already happening on (Telegram),” said Darius Sit, managing partner at Qcp Capital.

Deribit Chief Operating Officer Marius Jansen said that this is also the first time that investors can conduct block trades in cryptocurrency derivatives contracts outside the exchange's order book.

“When I talk to the trade side and the hedge funds, they really want that capability. Now they have to do it one by one. If you place an order and you want to take it out, it’s already been taken by someone else. out. It’s a big problem and there’s always a risk,” Jansen explained.

Cryptocurrency over-the-counter trader GSR Markets is clearly feeling this pain point, and it's one of the companies to adopt Paradigm's solution. “This facilitates smoother and more efficient volatility trading and is a positive step in strengthening the liquidity and robustness of the crypto options market,” said GSR Markets trader John Kramer.

Currently, Paradigm only offers options and futures contracts on Deribit. However, Gomes said that in the near future, it will be connected to other derivatives and spot exchanges.

According to Jansen, Deribit accounts for about 95% of the total volume of cryptocurrency options trading and is one of the top players in the derivatives space. Still, the market is heating up as hedge funds and trading firms start launching their own structured products for cryptocurrencies, including options, and since it was approved by the U.S. Commodity Futures Commission (cftc) in 2017, crypto derivatives exchange LedgerX has been Offers options to U.S. institutional investors.

“I expect other exchanges to add options, I’m actually looking forward to that,” Jansen said. “It’s also good for us if a bigger exchange has options and maybe educates their users.”