Hegic is an on-chain peer-to-pool options trading protocol built on Ethereum. Hegic allows users to buy wBTC or ETH call and put options with any strike price with flexible holding periods by utilizing Hegic’s liquidity pools.
We will take a look at the potential of Hegic over the next 15 –20 months, we will do this by having 3 assumptions for the market share of Hegic in the on-chain decentralized option marketplace. I believe the options market will grow tenfolds over the stated time period. As of December 2020, the ETH open interest was $900m, this means as of December, institutional and retail traders held an estimated $900m worth of active ETH puts & calls, in comparison, the wBTC open interest was $5B. Bitcoin options are utilized by institutions, bitcoin miners, and speculators.
Potential Scenarios
We will analyze the potential of Hegic by considering 3 scenarios where Hegic will have 1%, 30%, and 70% of the total market share for the next 15–20 months. In 2020, the daily ETH options volume ranged between $50m-$120m, wBTC had a daily options volume range between $300m-$800m. Open interest indicates the total number of options that are currently active and have not been exercised. The current total ETH Open Interest is $900m whiles that of BTC is $5B. Let's analyze 3 scenarios in which Hegic has 1%, 30%, and 70% of the on-chain marketplace.
Scenario 1(1% of on-chain options market)
Hegic with a 1% market share will have $5m-$12m in daily ETH options and $50k-$120k fees per day. Hegic will have $30m-$80m in daily wBTC options volume and $300k-$800k in fees generated for staking lots.
Daily Cash Flows;
$50k-$120k in ETH fees
$300k-$800k in wBTC fees
$350k-$920k in total fees per day
Factoring 1,332,815,000 Hegic in staking pools
$0.00026-$0.00069 fees per Hegic per day
This will lead to $0.0949-$0.2519 fees per each Hegic token annualized
Scenario 2 (30% of on-chain options market share)
In this case, Hegic will have $150m-$360m in daily ETH options volume whiles generating $1.5m-$3.6m in ETH per day for staking lots. Hegic will have $900m-$2.4B in daily options volumes with $9m-$24m in wBTC generated as fees for wBTC staking lots.
Daily Cash Flows;
$1.5m-$3.6m in ETH fees generated
$9m-$24m in wBTC fees generated
$10.5m-$27.6m in total fees per day
Factoring 1,332,815,000 Hegic in staking pools
$0.00787-$0.0207 fees per hegic per day
$2.87–7.55 fees per Hegic token annualized
Scenario 3(70% of on-chain options market share)
Hegic will have $350m-$840m in daily ETH options volume and generating $3.5m-$8.4m in ETH per day for Hegic staking lots, Hegic will also have $2.1B -$5.6B in daily wBTC options volume and generating $21m-$56m in wBTC per day to Hegic staking lots.
Daily Cash Flows;
$3.5m-$8.4m in ETH fees per day
$21m-$56m in wBTC fees
$24.5m-$64.4m in total fees generated per day.
Factoring 1,332,815,000 Hegic in staking pools
$0.0184-$0.0483 fees per Hegic per day
$6.72-$17.63 fees per Hegic token annualized.
We foresee the entire digital-asset market reaching 5–10T in market capitalization over the next 15–20months, the TVL in DeFi which currently is $20.4B should be in the range of $500B–$800B. The derivative market should expand exponentially, especially the non-KYC/AML options such as Hegic.
Disclaimer:
Investors must have the financial ability, sophistication, and experience to bear the risk of an investment. This article is intended for those with an in-depth understanding of the high-risk nature of investments. This article is not to be considered as investment advice and tax advice. Talk to your accountant and your investment advisor. Do your own research before making any investment decision.
