Bitcoin Derivatives Volume Has Grown 10 to 18 Times Bigger Than Bitcoin Spot Volume

Bitcoin price

As Bitcoin struggles to cross $8,000, derivatives trading is on an explosion. The amount of derivatives traded globally exceeds Bitcoin spot volume by 10 to 18 times says a Bloomberg report

Crypto Market Derivatives Continues To Flourish

The third quarter of 2019 saw the crypto market lose nearly $100 B in market cap and noted a sharp reduction of 42% in overall trading volume. Bitcoin lost 24% of its volume in the third quarter and even top -5 coins registered heavy losses with Litecoin shedding 54% of its value, going from $123 to $56.

Source- CoinGecko Q3 Report

Bitcoin price managed to surface around $10,000 until late September. It was followed by a sharp dip in Bitcoin’s price on the 24th of September. At press time, Bitcoin is trading at $7,495.

Source- CoinGecko Q3 Report

A surge has been noted in the crypto derivatives trading. While the high level of volatility in digital assets can be risky, high risk comes with high rewards.  CoinFLEX CEO Mark Lamb forecasted that the derivatives market will be 20 times the size of the underlying spot BTC market by the end of 2020.

“More and more hedge funds and more and more financial experts realize that there is an opportunity in this space. That means more volume going through the derivatives exchanges, and more liquidity coming into the overall ecosystem. So it is an interesting feedback loop.”

says Phillip Gillespie, CEO of B2C2 Japan, a cryptocurrency liquidity provider in Tokyo.

Leading the baton of derivatives trading Binance and BitMEX stand tall and offer futures contracts for Bitcoin and other crypto-assets with a leverage of more than 100 times. Subsequently, it has been a major factor in enthralling traders after Bitcoin’s decline since late 2017. Moreover, the thin liquidity is also a cause in the loss of interest as buy and hold Bitcoin whales control more than 33% of the total Bitcoin. Traders have been looking for new ways to profit as Bitcoin’s volatility has dropped to less than 2%. 

“That’s where the money is to be made in crypto. It’s the biggest casino ever.”

said Sid Shekhar, co-founder of London-based tracker TokenAnalyst.

“When trading with leverage, traders don’t have to tie up as much capital as you would trading spot. “This makes trading futures cheaper. This is the reason why futures trading in traditional markets is higher than spot trading.”

said Zhao Changpeng, CEO of Binance. 

A Look At The Volume of Futures

Binance Futures on the 15th of October recorded a volume of $700 M. Furthermore, Binance Futures recorded its 100K BTC on the same day.  

Source- Skew Markets

Needless to say, Binance Futures managed to climb the 3rd highest position. Moreover, in a span of 5 days, it managed to claim the 2nd spot in terms of 24-hour volume. 

Source- Twitter

Bakkt, which was being touted as a flop show also recorded an All-Time High(ATH) on its first monthiversary yesterday. It achieved 363 BTC on its Bitcoin Monthly Futures. 

Source- Bakkt Bot

Also, institutional interest on the long positions of CME BTC futures has risen by 450% in October. Furthermore, leading exchange OKEX makes up for 33.7% of the market share of crypto derivatives with a daily derivatives volume trading of $3.0 Bln. Also,  Andy Cheung, the exchange’s head of operations in Hong Kong, revealed that twice as many people have been trading derivatives than actual coins this year

Source- Skew Markets

Huobi was a  close second with a market share of  31.6% and 2.83 Bln. BitMEX perpetual BTC futures recorded a volume of $41.7 Bln. Interestingly, BTC futures products by Huobi and OKEx saw a healthy trading volume of $23.3 Bn and $17.4 Bn respectively.

BitMEX Has the Largest Share of Crypto Derivatives

Crypto futures started getting traction and went high gear in 2018. It was when BitMEX U.S. Commodity Futures Trading Commission, pioneered perpetual Bitcoin futures, which were easier for individual investors to understand than other derivatives

“BitMEX is probably at the center of the whole ecosystem right now,”

Shekhar said. 

He further said that BitMEX holds the largest share of crypto derivatives in the world and is estimated to be making at least $700,000 in fees from derivatives trading a day.

Will crypto derivatives continue to enjoy the same attention and volume in 2020? Let us know what do you think in the comments below!

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