Bitcoin volatility is declining, making domestic trading in the world's largest cryptocurrency a boring activity. Speculators looking fo...
Leading the downtrend in Bitcoin derivatives is the BitMex cryptocurrency with a 24-hour trading volume of $1.82 billion in bitcoin futures. Huobi is next with $1.00 billion in 24-hour trading, followed by bitFlyer with $0.67 billion, Binance with $0.56 billion and CoinFlex with $0.48 billion. The daily volume of global transactions in bitcoin derivatives is now between $5 billion to $10 billion, which is 10 to 18 times the size of bitcoin points.
What does that mean for investors?
Bitcoin derivatives trading recently overtook spot trading because the daily trading volume for both was roughly the same at the beginning of the year, although it should be noted that getting accurate information from cryptocurrency exchanges is not easy. At least one of the reasons for the drop in spot trading over derivatives trading is the presence of bitcoin whales, the market participants who control about a third of the cryptocurrency. These whales can have disproportionate effects on price movements and contribute to liquidity.
But the biggest reason for the change in derivatives trading is the lower volatility of Bitcoin. According to the BitMex exchange, according to Bloomberg, price fluctuations have recently reached less than 2% per day. While this may help improve Bitcoin's reputation as a stable value proposition and help those who see the digital currency as a form of money, it is a disappointing development for traders who are skeptical of the large price swings. However, the digital asset, which some have compared to gold, lost nearly 20% of its value in the four days leading up to the end of September.
But traders looking for more profitable sudden risks migrate to the derivatives markets and use leverage to increase potential profits in the absence of volatile price changes. BitMex and Binance both offer Bitcoin futures contracts that can be tapped over 100 times and are often outdated (like perpetual futures). Binance just started trading futures in September and currently has 34,000 registered derivatives trading clients, trading around $500 million per day.
“When trading with leverage, traders do not have to invest as much as they invest in capital,” Binance CEO Zhao Changpeng told Bloomberg. "It makes futures contracts cheaper. This is because the futures contracts in the traditional markets are higher than the spot trades."
But in traditional markets, derivatives are often used to block trade, which is not yet common in cryptocurrency markets. The largest use of derivatives in these markets is for speculation, which means that there is a lot of speculation. More than $23 billion was crypto-derivative in the first nine months of the year, including crypto options, futures, and other exotic instruments.
Looking to the future
But for some, speculation equals gambling. And while leverage can increase profits, it can also increase losses by using borrowed cash to increase exposure to financial assets. In a large enough market, massive losses could have far-reaching effects on other financial markets and create the potential for a financial meltdown, which is why government regulators around the world are taking a tough stance on cryptocurrencies. “The most popular products that people trade in, you can't even offer them in the United States,” Circle CEO Jeremy Aller told Bloomberg.
