How Are Financial Derivatives Related to the Volatility of Major Cryptocurrencies like Ethereum?

Financial derivatives, such as options and futures, allow investors to speculate on or hedge against price movements of cryptocurrencies without owning the underlying asset. High volatility in crypto prices increases the value of options, specifically their time and implied volatility components.

Futures contracts are used to lock in a future price, managing risk for miners or large holders. Derivatives markets provide liquidity and price discovery for the underlying crypto asset.