According to Jason Urban, Galaxy’s global head of trading, in 2022, decentralized finance (DeFi) had a great performance, while traditional methods of transacting, known as centralized finance (CeFi), faced some difficulties.
Galaxy Digital recently completed its first over-the-counter (OTC) option trade, which is an important milestone in integrating traditional finance into decentralized finance (DeFi) infrastructure.
The recent problems faced by FTX and the collapse of several crypto lenders have drawn attention to the risks associated with centralized finance (CeFi). CeFi involves trusting one’s money with a company instead of a decentralized protocol. These events have provided support for the growth of decentralized finance (DeFi). Galaxy Digital stated that these market events have highlighted the weaknesses of traditional bilateral options trading.
During an interview with CoinDesk TV this week, Jason Urban, who is Galaxy’s global head of trading, mentioned that DeFi had a great performance in 2022. On the other hand, centralized finance (CeFi) and some traditional transaction methods faced certain difficulties.
Galaxy’s trade was facilitated by Aevo, Ribbon Finance’s options trading platform, in collaboration with CoinFund, a crypto investment company.
Options, which are a type of financial product derived from an underlying asset, are typically traded privately between the buyer and seller instead of on a public exchange. In the crypto market, derivatives like options are gaining significance, and their trading volume compared to spot trading reached a record high last month.
According to Galaxy’s statement, trading bilateral options connected to cryptocurrencies eliminates credit risk, which is typically associated with traditional over-the-counter (OTC) options trades. This is because users send their collateral to a smart contract instead of a counterparty, reducing their exposure to the counterparty and any potential misuse of their collateral.
Christopher Newhouse, an independent trader specializing in cryptocurrency derivatives, stated that this development is a significant advancement in providing the necessary liquidity for the continued growth of DeFi derivatives. He further highlighted that Aevo OTC is a distinctive platform as it specializes in offering options for popular altcoins that are not typically traded publicly but instead through over-the-counter (OTC) channels.
This information is for general knowledge only and should not be considered as advice for investing or making financial decisions.
