How Derivatives Amp Up Already Heady Crypto Markets
- Date: 19-Jul-2021
- Source: Washington Post
- Sector:Financial Markets
- Country:Middle East
How Derivatives Amp Up Already Heady Crypto Markets
Bitcoin has long been known for its violent swings in price. But the volatility isn’t just driven by tweets from Elon Musk or warnings from Chinese regulators: It’s also fed by a massive derivatives industry that has boomed on the back of voracious demand for leverage and speculative tools in cryptocurrency markets. In some ways it’s a tale as old as Wall Street, but now in a new digital wrapper. For instance, when Bitcoin plunged as much as 30% in a day in May, leveraged-up positions in futures and options were wiped out, with the expected consequence of amplifying the sell-off as they had boosted the rally earlier.
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