Deribit dominates with $2.5B in daily options volume, while on-chain options still only reach 0.2% of perp volume. New infrastructure could change that.
A Bitcoin holder who wants less downside exposure today usually sells the asset or shorts a perpetual futures contract, taking on funding costs and liquidation risk. On-chain options offer a third path: paying a fixed premium, keeping the Bitcoin, and handing the crash risk to whoever is willing to price it.
Crypto built deep markets for owning assets and for leveraging directional bets. It left mostly untouched an equally deep market for managing the risk of holding them.
Options exchange Deribit has 85% market dominance for BTC and ETH options. It registered $2.5 billion in options volume in the past 24 hours, according to Coinbase, which closed its acquisition of the exchange in August. Open interest sits at $27.3 billion.
The picture looks different on-chain. OAK Research estimated in March 2026 that on-chain options trading accounts for roughly 0.2% of on-chain perpetual futures volume.
Spot and perpetual futures already give crypto investors the tools to own BTC or ETH outright or to take a directional bet with borrowed exposure. Options let an investor do something neither can: choose which risk to keep and which to hand off.
A long-term holder can buy a put to protect against a crash without selling. A fund can cap its maximum loss on a new bullish position by buying a call. A trader can buy a straddle to profit from volatility itself. A treasury holding assets it has no plan to sell can collect income by selling a covered call.
Options convert risk that used to be all-or-nothing into something with a price, a date, and a buyer on the other side.
Without a deep options market, reducing risk usually means selling spot or shorting perps. Both can pull capital out of the market or add liquidation-prone leverage. A put lets an investor keep the asset while paying someone else to hold part of the downside. That keeps capital in the market through drawdowns while investors remain exposed to the asset and someone else prices the transferred downside.
Options market makers manage their own directional exposure by trading the underlying asset or its futures as prices move. That ties options liquidity directly to spot and perpetual markets. Cheaper hedging lets those market makers quote tighter options. Tighter spreads draw more trading volume, which feeds more hedging flow back into spot and perps.
Spot activity depends on investors wanting to own the asset. Perp activity often depends on a directional bet. Options can attract different types of capital. Volatility funds, market-neutral desks, insurers, income sellers, arbitrage desks, and structured-product issuers can all enter when volatility is mispriced, protection is expensive, or event risk is tradable. Those conditions exist even in a flat or falling market.
On-chain options also price uncertainty across strikes and dates. They show how much investors will pay for protection, where upside demand concentrates, and which dates the market expects to produce the largest moves. That turns options into a forward-looking readout of how uncertain crypto is, beyond the price at any given moment.
DeFiLlama's 2025 DeFi report put weekly perp volume at $250 billion to $300 billion in 2025, up from roughly $50 billion in 2024. Open interest nearly tripled to close to $90 billion. Newer perp venues added exchange-grade matching, deeper order books, unified collateral and institutional-style risk engines on-chain.
When a trader buys an option, the market maker typically manages the resulting directional exposure by trading the underlying asset or its perp as the price moves. Market-structure research ties option spreads to how easily a market maker can hedge in the underlying market. Perps can become the hedging engine that makes on-chain options viable.
DeFiLlama's options dashboard shows on-chain options venue Derive crossing $1.2 billion in open interest. On-chain options premium volume hit a record above $51 million in March 2026. Measured against roughly $21.4 billion in average daily on-chain perp volume, DeFi's options market remains small enough that OAK Research put its share at about 0.2% of perp volume over the same period.
Protective puts would let long-term holders stay invested through a crash and cap the downside without having to sell into it. Covered-call vaults would let holders earn income on assets they already planned to keep. Cash-secured puts would pay treasuries to buy assets at a lower price if the market gets there. Liquidation would no longer be DeFi's only downside backstop, with explicit protection available before a position is ever margin-called.
A 2026 paper on on-chain options argues that automated market makers transformed decentralized spot trading. An equivalent standard has yet to emerge for options, the paper says. Reliable options infrastructure needs high-frequency price oracles and dependable liquidation engines that most chains still lack.
Block Scholes published a recent report on on-chain options that traces the sector's early failures to thin liquidity, difficult hedging, weak market-maker participation and rough user experience. The report says newer infrastructure such as central limit order books and request-for-quote systems is helping market makers quote specific strikes and expiries more reliably.
The more realistic path runs through vaults and structured products that hide the mechanics: a protected-BTC position, a fixed-yield note, or an embedded insurance policy that users never have to price themselves.
Dealer hedging can just as easily sharpen a move as soften one. Market makers who are short gamma around a crowded strike may need to sell as the price falls and buy as it rises, amplifying the swing already underway.
The bull case has perp liquidity, portfolio margin and market-maker participation deepening enough to support tight options pricing across more strikes and expiries. Funds, treasuries and hedgers start using on-chain options the way they already use Deribit. They stay invested through volatility while someone else prices the downside. DeFi gains native hedging, volatility trading, and insurance-like products that do not require selling the underlying asset to manage risk.
The bear case has options staying too complex and spreads too wide for the liquidity to consolidate. Strikes and expiries stay fragmented across chains and venues. Market makers, wary of thin hedging, keep quotes defensive. On-chain options remain a niche market for professional desks, and most users continue to manage risk as they do now: through perps or by selling spot when volatility spikes.
Perps already made crypto leverage portable. Options are what would make its risk portable too.
CME (CME Group Inc.) carries an Alpha Score of 56/100, labeled Moderate, in the Financials sector.
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