Executive Summary
The crypto market has evolved significantly in recent years, with the investment strategies in this space becoming more and more sophisticated. The maturity of these markets is reflected not only in substantial improvements to liquidity and infrastructure but also in the diversified financial instruments now available for trading and investment purposes. From spot markets to derivatives, traditional platforms to blockchain-based protocols, the advances in this industry have ushered in a wide array of products and tools for practitioners.
For bitcoin specifically, institutional players can now gain exposure to BTC through spot, fixed-term futures, perpetual futures, options, exchange-traded products (ETPs/ETFs) and equity proxies, among others. While perpetual futures have outpaced most markets (including spot) in trading volume, this activity has thus far been primarily relegated to retail traders outside the US. Our recent survey data suggests US institutions mainly invest in crypto via spot and ETPs.
But the shift in the US regulatory landscape could pave the way for broader participation from hedge funds, CTAs and other institutions, who tend to rely on derivatives for these vehicles’ capital efficiency, liquidity and flexibility. Furthermore, the question of where institutions choose to trade – whether through centralized exchanges, decentralized exchanges (DEXs) or over-the-counter (OTC) - illustrates the expanding suite of choices that institutions have to help align their operational objectives. In this report, we analyze the various products available to institutional investors by comparing their efficiency, size, costs and tradeoffs as well as examining the market dynamics shaping their adoption.
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