After $1 billion year, GSR looks to expand footprint in bespoke crypto options

After a landmark year for the digital asset derivatives space, one market-making firm is expanding its suite of bespoke options.

GSR Trading—one of the longest operating liquidity providers in the space—told The Block that it is now offering bespoke options in Filecoin, Polkadot, and Algorand.

Unlike vanilla options that trade on an exchange like Deribit's order-book, GSR's bespoke options are custom-made for larger investors in the market, with GSR acting as the counter-party.

The development of such structured products has taken place behind the scenes amid the growth of listed options markets run by the likes of CME Group and Deribit. At last check, the aggregate open interest across bitcoin options markets stood at $5.8 billion.

Such a development speaks to the increased risk-management needs for market participants. GSR reported that it traded more than $1 billion worth of customer bitcoin and other crypto options in 2020.

“After exponential growth for our bespoke options in 2020, we are excited to facilitate the growth of FIL, DOT and ALGO options markets in 2021, as there is already substantial interest, along with many others,” GSR co-founder and president Richard Rosenblum told The Block in a comment.

In an overview of the firm's 2020 activity, GSR said that project teams are more strategic than they were in 2017-18. These teams, the company said, turned to GSR to create custom options contracts to help preserve their capital.

“The purpose of these instruments is to mitigate risks and optimize balance sheet efficiency,” GSR said. “We predict that these custom options markets will facilitate liquidity and lay the foundation for what will eventually be listed altcoin products on exchanges.”

Elsewhere, the firm is increasing its footprint in crypto mining — where its custom products surpassed an annualized run rate of $250 million by the end of last year. As for its activity across options, the firm's total daily open interest was larger than CME for 2020.