Galaxy Digital, a crypto-focused company, has introduced the trading of over-the-counter (OTC) options linked to digital assets on the blockchain. It is believed to be a major progress in the finance industry, especially after the failure of several centralized players in this sector.
The company has eliminated the credit risks generally associated with traditional OTC options trading while ensuring privacy. Unlike options traded on formal exchanges, OTC options are derivatives contracts that are privately negotiated between the buyer and seller, allowing them to establish their own terms, such as the strike price and expiration dates.
Both parties must submit their side of the settlement on the blockchain and only then are funds released. Galaxy Digital employed Aevo, an on-chain options trading platform developed by Ribbon Finance, to execute, margin, and settle the trade. Aevo recently launched its OTC exchange, enabling users to trade altcoin options on-chain across various maturities.
The first crypto investment firm to engage in such a trade was CoinFund. The company opted to use Aevo due to its beneficial margin requirements, on-chain payoff enforcement, and the capacity to select precise strike prices. Last year, Galaxy Digital conducted an OTC crypto transaction with banking giant Goldman Sachs, involving a bitcoin non-deliverable option. The company reported a net income of $134 million in the first quarter, underlining it’s strong market position.
Compiled by Coinbold
