How Does the ‘Black-Scholes’ Model Adapt to the Unique Characteristics of Crypto Options?

The Black-Scholes model is often adapted for crypto options by making adjustments for the lack of a risk-free rate (or using a stablecoin lending rate) and the high volatility. The model's assumptions of continuous trading and log-normal distribution are often violated in crypto due to market fragmentation and 'fat-tailed' price movements.

More advanced models like jump-diffusion are sometimes preferred, but Black-Scholes remains a foundational reference.