Deep Dive Into the Crypto Options Market: Rapid Shifts and the Road Ahead

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The decentralized finance (DeFi) landscape continues to evolve at breakneck speed, and nowhere is this more evident than in the crypto options market. Once a niche segment, options protocols are now undergoing rapid transformation — with new platforms emerging, established players pivoting, and others fading into obscurity. This dynamic shift raises critical questions: Who’s adapting? Who’s falling behind? And can DeFi options carve out a sustainable niche amid the dominance of perpetual futures?

The Evolution of DeFi Options: A Market in Flux

A year ago, DeFi options protocols could be categorized into four primary models:

Since then, the terrain has dramatically changed. Some protocols have scaled aggressively, while others have rebranded, pivoted to perpetuals, or shut down entirely. The survival rate? Surprisingly low. As @DanDeFiEd, founder of Rysk Finance, once remarked during a derivatives talk at ETH Milan: “Some of you are NGMI.” That warning proved prophetic — roughly 50% of the protocols mentioned in early analyses have either abandoned options or ceased operations.

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Why the High Failure Rate?

Two major trends have reshaped user behavior and capital allocation in DeFi:

  1. The rise of points farming and meme coins has diverted attention from complex financial instruments like options.
  2. Perpetual contracts offer leveraged exposure with simplicity and deep liquidity — a combination that remains hard for options to match.

As traders chase short-term rewards and easy leverage, many options protocols struggle to achieve product-market fit (PMF). The allure of instant yields often overshadows the nuanced value of risk hedging, volatility trading, or structured yield enhancement — core use cases for options.

Yet, signs of revival are emerging.

Key Trends Shaping the Future of DeFi Options

Retail Momentum in Traditional and Crypto Markets

In traditional finance (TradFi), retail investors have driven a surge in short-dated, high-risk options trading. Weekly options volume has doubled from 100 million contracts in 2018 to 200 million in 2024 — with retail accounting for nearly 45% of total options volume.

This behavioral shift is now echoing in crypto. As retail traders increasingly seek short-term, leveraged opportunities, the question arises: Can DeFi options capture similar momentum? Or will perpetuals continue to dominate the narrative around on-chain leverage?

Resurgence in Options Activity: Metrics That Matter

Despite setbacks, 2024 has brought renewed interest in DeFi options — driven by new entrants and improved user experience.

Nominal Volume Recovery

While nominal volume rebounded sharply in 2024, a deeper look reveals nuances.

Premium Volume: A Truer Signal of Demand

Premium volume — the amount buyers pay sellers for options — reflects genuine demand and confidence.

This triple-digit growth in premium volume signals rising market maturity. Users aren’t just trading — they’re paying more for exposure, indicating stronger conviction.

However, a gap persists: while nominal volume grew 18x, premium income for liquidity providers (LPs) rose only 3.7x. This suggests much of the volume comes from low-cost, out-of-the-money (OTM) options — speculative bets rather than strategic hedging.

Options vs Perpetuals: The Battle for Dominance

Perpetual futures remain the king of on-chain derivatives.

Though still dwarfed, options are gaining ground. Weekly perp volume hit $41B in 2024**, up from $10–12B in prior years. Meanwhile, options volume remains around 1/100th** of that.

Yet narrowing the gap is progress. The challenge? Simplicity. Perps offer seamless leverage with high liquidity. Options require understanding strike prices, expiry dates, and volatility — a steeper learning curve.

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New Players Entering the Arena

Innovation continues despite market volatility. Here’s a breakdown of emerging protocols across key categories.

Orderbook & RFQ-Based Platforms

Failed or pivoted: Opyn → perpetuals; Psyoptions → shutdown; Zeta → full pivot to perps.

Internal AMM Protocols

These use proprietary AMMs for pricing.

Failed or pivoted: Ntropika (radio silence post-funding), Oddz (to perp aggregator), Siren (to oracle/RFQ model).

External AMM Protocols

Leverage existing AMMs like Uniswap as base layers.

All three remain active — a rare win for this category.

Structured Products

Once dominant in TVL, this segment has seen massive attrition.

Still active:

Exited or failed: JonesDAO, Katana, Polynomial (→ perp L2), StakeDAO — all left the space.

Can History Repeat — or Will It Rhyme?

The revival led by AEVO and Derive signals growing interest, but also highlights a paradox: true decentralization may be losing appeal. Many protocols now rely on centralized L2s or appchains to maintain control over latency, fees, and order matching — essential for efficient orderbooks.

Like the perpetuals market before it, DeFi options may evolve into a hybrid model: decentralized in ownership, but optimized through centralized execution layers.

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Frequently Asked Questions (FAQ)

Q: What are crypto options?

A: Crypto options are financial derivatives that give holders the right — but not the obligation — to buy (call) or sell (put) an asset at a set price before a specific date. They’re used for hedging, speculation, or generating yield.

Q: Why are perpetual contracts more popular than options in DeFi?

A: Perps are simpler to use, offer continuous trading without expiry, and have deeper liquidity. Most retail traders prefer immediate leverage over complex option strategies.

Q: What is premium volume and why does it matter?

A: Premium volume is the total amount paid by buyers to sellers for options contracts. It reflects real demand and confidence — unlike nominal volume, which can be inflated by low-cost speculative trades.

Q: What caused so many options protocols to fail?

A: Lack of product-market fit, competition from perps, reliance on unsustainable token incentives, and low user adoption of complex strategies all contributed to high failure rates.

Q: Are zero-day-to-expiry (0DTE) options popular in DeFi?

A: Yes — mirroring TradFi trends, 0DTE options are gaining traction among retail traders seeking short-term exposure. Protocols like AEVO, Hegic, and Opium now support them.

Q: Can DeFi options ever surpass perpetuals in volume?

A: Unlikely in the near term. But they can carve out a meaningful niche by focusing on structured products, hedging tools, and institutional-grade risk management — areas where perps fall short.

Final Thoughts

The DeFi options market is at a crossroads. While perpetuals dominate today, rising premium volumes and innovative new protocols suggest growing maturity. The path forward won’t be easy — high failure rates, user complexity, and competition remain steep hurdles.

But as retail appetite for sophisticated financial tools grows, so does the opportunity. The survivors will be those that combine usability with real utility — turning volatility into value, and complexity into clarity.

For traders and builders alike, the next chapter of DeFi derivatives is just beginning.