Crypto Options Narrative [6/6]
The current trend in the options TVL (Total Value Locked) is focused on selling options rather than buying them, which leads to a structural liquidity mismatch. This is expected to change as more alternatives for generating yield through options become available and the market becomes more professionalized, leading to increased competition for yield and lower returns. A balance between buying and selling options will improve price discovery and impact the business models of some DOVs (Decentralized Option Venues). There is currently no clear winning solution for DeFi options, with all existing mechanisms carrying some form of inefficiencies. The DeFi options space is expected to grow in the coming years, with the potential for on-chain options to reach 60 times their current usage. This growth will be facilitated by improved technology, deeper liquidity, and institutional trader adoption. However, as the complexity of the space increases with the introduction of more exotic options, it is important to remember that risk is merely being transferred, not vanished.
Thank you for reading. This was summarized via ChatGPT for easier reading from an article by Brick published on Substack. You may find the original article here: https://thebrick.substack.com/p/options-are-always-valuable