Bitcoin’s Spot-to-Derivatives Trading Volume Ratio Slides to Lowest in 11 Months
The ratio between bitcoin’s (BTC) daily trading volumes in spot and derivatives markets has slipped to an 11-month low, signaling renewed speculative activity in the crypto market.
The ratio has tanked by nearly 80% in three months, reaching a low of 0.117, the level last seen on May 16, 2022, according to data tracked by South Korea-based blockchain analytics firm CryptoQuant.
The decline comes amid a 70% year-to-date rise in bitcoin’s price and indicates improved risk appetite in the crypto market and potential for price volatility.
The slide has been quite sharp since bitcoin first ran into crucial resistance above $28,500 on March 21. It shows speculators have recently piled into bitcoin at a faster rate relative to retail investors and long-term holders.
“The theory that the 2023 crypto rally is driven by a diversification out of the USD and the associated bank credit risk might be standing on weak ground if the rally was indeed purely driven by an increase in leverage,” Markus Thielen, head of research and strategy at Matrixport, said, noting the decline in the volume ratio.
“As the on-ramp from fiat into crypto has become materially more difficult with the likes of Silvergate and Signature Bank being taken over by the regulators. This would suggest that the amount of liquidity has remained the same within crypto but has been allocated to higher leverage products,” Thielen added.
The spot market is a platform for trading financial instruments for immediate delivery. Derivatives are contracts of a group of products, including futures and options with values dependent or derived from an underlying asset and involve leverage that magnifies both profits and losses. Derivatives are traded for future delivery.
The spot market activity is usually equated with long-term investors. At the same time, derivatives are considered a proxy for sophisticated traders and speculators who have ample capital supply and make risky leveraged bets to magnify returns.
Edited by Parikshit Mishra.
DISCLOSURE
Please note that our
privacy policy,
terms of use,
cookies,
and
do not sell my personal information
has been updated
.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a
strict set of editorial policies.
CoinDesk is an independent operating subsidiary of
Digital Currency Group,
which invests in
cryptocurrencies
and blockchain
startups.
As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of
stock appreciation rights,
which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG
.
Omkar Godbole was a senior reporter on CoinDesk’s Markets team.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.
Omkar Godbole was a senior reporter on CoinDesk’s Markets team.