Exploring the Crypto Futures and Options Phenomenon 📈
A Gurgaon-based trading firm, Vommafi Technology, supported by family offices, ventured into the world of cryptocurrency futures and options (F&O) in early 2024, dedicating 30% of its total portfolio to this investment. One trader reported making approximately $1 million (~Rs 8 crore) in daily turnover through crypto F&Os. Indian traders have shown a strong inclination towards crypto F&O, with major exchanges like CoinDCX and Delta Exchange experiencing a surge in trading volumes.
The Rise of Crypto Derivatives 🚀
- Global crypto derivatives exchange Delta Exchange, recently established in India, has achieved peak trading volumes of $300 million in Bitcoin and Ethereum derivatives in a single day.
- CoinDCX, a platform offering crypto futures, is anticipated to witness around $50 million of its daily trade volumes originating from futures contracts.
- The market is projected to attract a trading capital of $100-$150 million daily, with other entities exploring the launch of their F&O products in the near future.
The F&O Frenzy and Its Implications 💸
- With India boasting one of the largest populations of equity derivatives traders globally, the interest in crypto F&O is on the rise, surpassing spot volumes.
- Diverse investors seek to diversify their portfolios by investing in crypto F&O, attracted by the technological advancements, liquidity, risk management, and protection mechanisms offered by platforms like Delta Exchange.
- Differentiating between futures and options: futures contracts involve buying or selling an asset at a predetermined price and time, while options grant the buyer the right, but not the obligation, to buy or sell an asset.
The Allure of Crypto Volatility and Premiums 💰
- Investors in India, known for their high-risk appetite, are drawn to the volatile nature and attractive premiums offered by the cryptocurrency market.
- As the largest derivatives trading market globally, India sees significant volumes in equity derivatives, with billions traded daily.
- Crypto derivatives provide an avenue for investors to hedge against market volatility and potentially amplify returns through leverage, although this strategy comes with inherent risks.
The Tax Complications and Regulatory Hurdles ⚖️
- One of the primary challenges hindering the participation of large traders and institutions in the crypto futures segment is the regulatory uncertainty surrounding crypto legitimacy and taxation.
- The 1% TDS imposed on exchange of virtual digital assets (VDAs) raises concerns among traders and platforms regarding the tax implications of futures trading.
- Exchanges offering futures trading often require margins to be paid in stable coins like USDT, triggering TDS liabilities and complicating the tax landscape for VDA futures in India.
Hot Take: Navigating the Evolving Crypto Landscape 🌐
As the crypto futures and options market gains traction among Indian traders, it is crucial to stay informed about the regulatory developments and tax implications associated with these investments. Educating yourself on the risks and rewards of leveraging crypto assets can help you make informed decisions in this dynamic and evolving landscape. Stay updated on the latest trends and regulations to navigate the crypto market effectively and leverage its potential for financial growth.
By
By
By