Bybit has become one of the first pure-play crypto derivatives exchanges to allow users to buy cryptocurrency with fiat. Thanks to a partnership with payment providers Banxa and Xanpool, Bybit users can now purchase cryptocurrency with credit or debit cards, or via bank transfer, directly on the platform. Over 20 different fiat currencies are supported, enabling the purchase of Bitcoin (BTC) or Ethereum (ETH.)
Before now, Bybit users wanted to trade cryptocurrency perpetual swaps on the platform had to use a separate fiat onboarding service such as Coinbase or Changelly to convert their fiat currencies to cryptocurrency before they could deposit on Bybit. Therefore, the introduction of a fiat on ramping service represents a significant reduction of friction for users coming to Bybit without an existing portfolio of cryptocurrencies.
In a press release accompanying the announcement, Bybit CEO Ben Zhou said: “Adding fiat-crypto support is another major milestone in our roadmap, and a major coup for Bybit traders who have been patiently waiting for this day to arrive.”
The company is marking the occasion with a promotional giveaway of Bitcoin. Users who take advantage of the new fiat onboarding service will be rewarded with $10 worth of BTC for every $100-worth of BTC or ETH they purchase, up to a maximum of $50 worth of BTC. The promotion runs until July 22.
Bybit has been enjoying steady growth since it launched as a rival to market leader BitMEX in 2018. The company has launched several new products and features in 2020 alone. These include a range of perpetual swap contracts backed by stablecoin Tether (USDT), which offer increased hedging opportunities for traders.
Increasing Institutional Adoption
Reducing friction and increasing hedging opportunities are two ways that Bybit is helping to attract institutional investors, such as JPMorgan (NYSE: JPM) or Citigroup (NYSE: C) to the cryptocurrency space. Strategies like these appear to be working. A recent survey released by Fidelity Digital Assets (NYSE: FIS) found that, of 800 US and European investors, 80% believed there was “something appealing” about having digital currencies as part of their portfolio. 36% are currently invested, and six out of ten respondents said they believed that digital assets have a place in their portfolio.
Among these investors, interest in cryptocurrency derivatives appears to be growing rapidly. Of those investors who have already bought into cryptocurrencies, 22% are trading derivatives, up from just 9% from the same survey in 2019.
This interest is reflected in both trading volumes and open interest in crypto derivative products. According to a recent cryptocurrency exchange report from CryptoCompare, trading volumes of cryptocurrency derivatives hit an all-time high in May 2020, totaling $602 billion.
There appears to be a particular interest in options products. Data from Skew, a leading cryptocurrency trading data aggregator, supports this, showing that open interest in Bitcoin options is currently soaring.
So what’s driving the interest in cryptocurrency options? It’s likely to be institutional investors. Trading cryptocurrency futures comes with significant risk, due to the volatility of cryptocurrencies, along with the opportunity to trade at high leverage. The increasing availability of crypto options offers a familiar way for investors to hedge against losses incurred in futures trading.
Crypto exchanges are responding well to this demand for hedging opportunities. Bybit’s mutual insurance is one example, while other exchanges such as OKEx have expanded their product range into options, in response to demand. It seems that as the crypto markets are maturing, more professional investors are likely to enter the space, creating a self-fulfilling cycle of institutional adoption.