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James Carter

March 25, 2023

Bitcoin Spot and Derivative Trading Volumes Surge-What This Means for BTC?

In the past few weeks, both spot and derivative trading volumes for Bitcoin have been on the rise. This is happening at the same time that the cryptocurrency has been making a strong comeback from early monthly lows below $20,000.

Bitcoin Spot and Derivative Trading Volumes Surge

That shows that the recent move up has a lot of conviction behind it. This week, Bitcoin went over $28,000 for the first time in nine months.

According to CoinGecko, Bitcoin has gone up nearly 4% in the last 24 hours, 13.5% in the last seven days, and 19% in the last 30 days. Its price is now in the mid-$28,000 range.

Since the middle of March, Bitcoin’s price has been going up. This is because of worries about US (and global) financial stability after a string of well-known bank failures, as well as a dovish turn by the US Federal Reserve.

Even though the US central bank still raised interest rates by another 25 basis points (bps) this week, because inflation is still roaring well above its target, it changed its tone about the likelihood of more rate hikes, and markets are betting hard that rates will start to go down in the second half of 2022.

Spot & Derivative Volumes Surge in Bull Market Tell

The latest rise in the volume of Bitcoin trades is more evidence that a new Bitcoin bull market has started.

According to CoinGecko, Bitcoin has gone up nearly 4% in the last 24 hours, 13.5% in the last seven days, and 19% in the last 30 days. Its price is now in the mid-$28,000 range.

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Since the middle of March, Bitcoin’s price has been going up. This is because of worries about US (and global) financial stability after a string of well-known bank failures, as well as a dovish turn by the US Federal Reserve.

Even though the US central bank still raised interest rates by another 25 basis points (bps) this week, because inflation is still roaring well above its target, it changed its tone about the likelihood of more rate hikes, and markets are betting hard that rates will start to go down in the second half of 2022.

Spot & Derivative Volumes Surge in Bull Market Tell

The latest rise in the volume of Bitcoin trades is more evidence that a new Bitcoin bull market has started.

The 7-day Moving Average of Bitcoin trading volumes on exchanges rose to around $24 billion earlier this week, the highest level since the middle of 2021, according to data from The Block.

Even though March isn’t over yet, the amount of Bitcoin futures traded so far this month is already close to $1 trillion, which is the most since September of last year.

It will likely be at its highest by the end of the month since July or June of last year. Bitcoin futures are a form of the spot Bitcoin asset that they are based on.

Futures are contracts that promise to deliver an asset at some point in the future. Industrial companies trade commodity futures to make sure they have enough raw materials, but futures are also used for speculation, like in the case of Bitcoin.

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This month, the volume on the Bitcoin options market has also been rising. Even though the month isn’t over yet, March has already seen more Bitcoin options trade (at nearly $25 billion) than any other month since May.

Investors use Bitcoin options to bet on price changes or protect themselves from them. Since they are harder to understand and trade than other asset classes, institutions, and professional trading desks do more of the trading.

So, a rise in the number of Bitcoin options contracts could mean that institutional trading is on the rise. Another sign that institutions are getting more involved in the recent rise in the number of Bitcoin options that are open.

As of March 22nd, open interest had risen to $12.14 billion, which was the highest it had been since November 2021, when Bitcoin was at its all-time high.

What Does This Means for BTC?

The fact that volumes are going up on both spot and derivative markets is a strong sign that the latest Bitcoin rally, which has caused prices to rise by a staggering 70% this year, is not just a flash in the pan.

In fact, the rise in Bitcoin trading goes along with a lot of positive on-chain signals that have a good track record of predicting when Bitcoin will move from a bear market to a bull market, as this article explains.

Even before problems with US banks and the Fed’s dovish shift made the 2023 rally even more exciting, many investors already thought that the bear market of 2022 was over.

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Analysts have pointed out that $30,000 is the next big obstacle, and technicians have warned that 10% pullbacks are always a risk. Things are sure to get rough in the coming months.

But positive fundamental trends (like the fact that more people want Bitcoin as an alternative to fiat currency and because they think the Fed will ease monetary policy), positive on-chain signals (like rising network activity), and positive trading trends (like the fact that more investors are buying) should keep acting as a tailwind for the time being.

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