Bitcoin Spot and derivatives trading volumes have been surging from the initial monthly lows of $20,000 as the cryptocurrency rallied aggressively over the past few weeks.
This suggests that there is a lot of confidence behind the recent highs that were seen Bitcoin Eclipsed $28,000 this week for the first time in nine months.
At current levels in the mid-$28,000s, Bitcoin According to CoinGecko, there has been an increase of about 4% in the last 24 hours, 13.5% in the last seven days, and 19% in the last 30 days.
of bitcoin This has been supporting the price since mid-March amid concerns about US (and global) financial stability following a series of highly publicized bank failures, as well as thanks to an associated dovish pivot. US Federal Reserve,
Despite a 25 bps hike in interest rates this week, inflation still well above target, the US central bank softening its tone on the outlook for further hikes in interest rates, and markets nearing the end of the rate-cutting cycle. Betting aggressively on the start. Starting second half of 2022.
Spot and derivatives volumes surge in bull market tail
fresh surge in Bitcoin The trading volume adds to the reasons to think that a new bitcoin bull market has arrived.
The 7-day moving average of bitcoin trading volume on exchanges surged earlier this week to nearly $24 billion, the highest level since mid-2021, according to data presented by The Block.
Meanwhile, despite March not being over yet, the volume of bitcoin futures traded on exchanges so far this month is already nearing $1 trillion, its highest level since last September.
It will probably end the month at its highest level since last July or June. Bitcoin futures is a derivative of the underlying spot bitcoin asset.
Futures represent a guarantee that an asset will be delivered at some point in the future. Industrial businesses trade commodity futures to secure their raw material supplies, but in the case of bitcoin, futures are also used for speculation.
Bitcoin options market volume is also on the rise this month. Even though the month isn’t over yet, March has already seen more bitcoin options trading than any month since last May (almost $25 billion).
Investors use bitcoin options to bet on or hedge against price fluctuations. Given that they are a more sophisticated asset class to understand and trade, institutional and professional trading desks make up a large portion of the overall trading volume.
An increase in bitcoin options volume may thus indicate that institutional trading activity is on the rise. Another telling sign that institutions are taking a higher number of moves / is the recent spike in Bitcoin Options Open Interest.
by wednesday 22Ra In March, open interest had risen to $12.14 billion, the highest level since November 2021, when bitcoin hit its previous high.
What does this mean for BTC?
Rising volumes in the spot and derivatives markets send a strong signal that the latest bitcoin rally, which has seen prices rise more than 70% on the year, is much more than just a flash in the pan.
In fact, the surge in bitcoin trading activity goes hand in hand with a plethora of positive on-chain signals, which have a strong track record of predicting when bitcoin will transition from a bear to a bull market, as discussed in this article. Has been.
Even before US banks’ troubles and the Fed’s resulting dovish shift added further spice to the 2023 rally, many investors were already at the conclusion that the 2022 bear market is far from over.
Analysts have identified $30,000 as the next major hurdle, while technicians warn that a 10% pullback is an ever-present risk. Things will definitely be volatile in the coming months.
But positive fundamental trends (between rising demand for bitcoin as a fiat currency alternative and expectations for Fed easing), positive on-chain signals (such as increasing network activity) and positive trends in trading (more investors buying suggesting steps to be taken) should remain a favorable wind for the foreseeable future.