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Digital Derivatives Weekly
April 27, 2020

Digital Derivatives – Oil and Exchange Tokens

Kasper Rasmussen

Digital Derivatives is a weekly newsletter bringing you the latest research, information and analytics from the cryptocurrency derivatives space brought to you by Delta Exchange


For last week’s edition, click here.



Market Moves


  • Bitcoin (BTC) – $7,548.36 (+6.33%)
  • Ethereum (ETH) – $189.32 (+4.33%)
  • Ripple (XRP) – $0.196 (+4.65%)
  • Bitcoin Cash (BCH) – $240.82 (+5.12%)
  • Litecoin (LTC) – $43.81 (+5.41%)
  • EOS (EOS) – $2.72 (+4.45%)



Derivatives Insights


The Real Value Of Exchange Tokens

The digital asset space consists of a healthy dose of speculation and wishful thinking. Ambitions are high, with tokens envisioned to do everything from decentralizing the healthcare industry to creating a global network of supercomputers. When it comes down to it however, many of these tokens have fallen short, with little to show for in terms of practical use cases. There is, however, one category of tokens that stands out when it comes down to utility – exchange tokens. 


As the digital asset space evolves, one trend continues to stand out. Volatility is king, and speculators love to trade cryptocurrencies. The overwhelming growth in exchange volumes, users, revenues, teams and more continue to confirm this. 7 of the 10 highest valued blockchain companies are trading-related, the top earners in the space are exchanges and the trading infrastructure surrounding the digital asset space continues to evolve. 


Exchange tokens are cementing themselves as the golden standard for utility tokens, with their range of holder benefits, burn/buyback mechanisms and other equity-like features. They fail to capture many of the most appealing components of a cryptocurrency – decentralisation, immutability, security – and instead function largely as blockchain-based company shares. 


USD Prices of Exchange Tokens



Exchange tokens tend to fluctuate with the general market, with the added idiosyncratic risk of being dependent on the longevity of their respective exchanges – if the exchange goes down, the token goes down. Contrary to the vast majority (99.9%?) of other tokens, exchange tokens are backed by solid, revenue-generating businesses with real teams and concrete growth plans. They have utility as intended and provide a genuine, non-forced benefit to their holders. 


Below we take a look at the top 5 exchange tokens and how they have fared in the past months relative to Bitcoin: 


Price MCAP Exch. Vol Token Vol MC/VOL % YTD BTC YTD %  MCAP as % of BTC
BNB $16.29 2.53B $2.02 B $448.42 M 1.25 18.04% 5.12% 1.83%
LEO $1.05 1.05 B $219.42 M $11.26 M 4.79 29.63% 5.12% 0.76%
HT $3.99 888.16 M $1.23 B $409.86 M 0.72 45.09% 5.12% 0.64%
OKB $4.96 297.88 M $1.65 B $156.16 M 0.18 89.69% 5.12% 0.21%
FTX $2.82 269.19 M $644.6 M $95.42 M 0.42 31.16% 5.12% 0.19%


Exchange token returns are positively correlated with BTC price movements YTD. Compared to BTC rising 5.12% YTD, the “worst” performing exchange token (in the top 100 coins) has returned 18.04% (BNB), with OKB returning as much as 89.7%. 


YTD Returns of Exchange Tokens
YTD Returns of Exchange Tokens


The market capitalisations of exchange tokens relative to the trading volumes of the underlying exchanges are difficult to accurately analyse due to the opaque and often distorted nature of (self-reported) exchange volumes. If we were to go by volumes as reported by CoinMarketCap however, the MCAP/VOL metric acts as an interesting proxy for the P/E ratio of exchange tokens. In this case Bitfinex/LEO has the highest MCAP/VOL ratio (4.79) with OKEx displaying the lowest ratio (0.18).


BTC Denominated Returns of Exchange Tokens
BTC Denominated Returns of Exchange Tokens


The continued growth of exchange tokens will be fascinating to watch, and I’d speculate that they will continue to grow in popularity as the digital asset landscape becomes increasingly trading oriented. With the growth in exchange numbers, tradable assets and accompanying infrastructure (derivative markets and more), the trading activity surrounding digital assets will continue to rise in prominence.


What Happened To Oil? A Brief Summary


TLDR;  Traders desperate to avoid having to physically own oil mass fled markets sending the oil price into negative territory – for the first time ever. 


As demand remains flat and outlook uncertain, traders are left wondering what’s to come. 


May Oil Futures expired Tuesday April 21st. As WTI oil contracts expire, holders are required to take possession of 1000 barrels of oil for every contract owned.


This shocked hedge funds and traders who had jumped into oil contracts, only to realise that physical ownership became an obligation upon expiration. “I never been contacted by as many hedge funds as I did yesterday looking for storage. I had dozens of emails and phone calls from hedge funds. They never really thought about the aspect of the physical delivery.” – Ernie Barsamian, CEO @ The Tank Tiger.



Faced by the risk of physical settlement at expiry – having to physically purchase + store barrels of oil – traders engaged in a frenzied sell-off which didn’t stop until oil hit a price of -40 USD per barrel. Analysts suggest this may occur again in the near future as oil supply continues to outweigh demand. Coronavirus has cut fuel consumption by +30% in a month and this does not look to reverse anytime soon.




Two weeks ago OPEC + Russia + US decided on a 10% cut in oil production to prevent this exact production mismatch. This was clearly not enough. Unless production is reduced further, or consumption rises, next month is likely to see a repeat as June futures expire.



Delta Developments


Surviving Crypto Volatility With Derivative Contracts

As cryptocurrency derivative markets mature, we are seeing more and more traders participate in Options markets and trading volatility. In traditional markets, the volumes on Options contracts can be multifold of those on Futures contracts.”

Our CEO and Founder, Pankaj Balani, wrote a piece on the growing digital asset derivative infrastructure and how they work to provide traders with more direction and transparency.  


View the full article here



Launche ETH-USDT Perpetual Contracts with up to 100x Leverage



We’re stoked to launch the ETH Perpetual contract, settled in USDT, with up to 100x leverage. View the markets here.

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