Crypto derivatives exchange Deribit is launching the free exchange of bitcoin and other tokens, sparking a new price war among digital asset exchanges as they seek to reemerge after a deadly year for the industry.
The Panama-based group, the world's largest crypto options exchange, will begin direct trading in three of the most popular cryptocurrency pairs starting next week and will waive fees.
His decision underscores how competition is heating up between crypto exchanges as they try to lure institutional investors eager to enter a rising market after digital asset prices plummeted last year and l failure of the industry flagship FTX. Approximately 90% of Deribit's clients are institutional clients.
Popular coins such as bitcoin and ether have outperformed assets such as stocks and commodities this year, rising 50% and 65% respectively.
It also comes a month after Binance, the world's largest marketplace for crypto trading, ended a six-month foray into fee-free trading, a move that has boosted its market share.
Luuk Strijers, Chief Commercial Officer of Deribit, said the switch from exchange to cash trading was driven by customer demand.
"You should buy ether on Binance instead of Deribit," he said, adding, "If you want to convert $5 million [into bitcoin]for example we would have to tell you to go somewhere else which is terrible customer service.
"To have a proper derivatives offering, you also need to have spot," he added.
Renowned fund managers continued to explore digital assets and monetize investor interest over the past year, even as the sector suffered from a crisis of confidence and many companies went bankrupt.
“Serious institutional players remain engaged and, in fact, see the open space after the demise of several crypto-native players as an opportunity.” Bernstein analysts wrote this week.
Deribit will offer free exchange of ether and bitcoin pairs, and ether and bitcoin against the USDC stablecoin, which is operated by Circle. US-listed Coinbase charges up to 0.6% for a transaction, for example.
Strijers added that trading on all three pairs will remain free to trade "for the foreseeable future" and any future tokens that may be added will be chargeable.
Binance's market share soared by one-fifth after it launched fee-free trading of 13 coins and reached almost two-thirds of the exchange's total volume, according to data provider Kaiko. However, the exchange's advance receded after the charges were reintroduced.
Deribit added that it is looking to use spot trading as an entry for clients to trade options and futures. Strijers said it would “serve our existing customer base and potentially attract new customers who then. . . will also trade options, futures or perpetuals [futures]”.
Deribit was founded in 2016 and is backed by investors including venture capital firm 10T Holdings and trading firm Akuna Capital.