Bitcoin Spot & Derivative Trading Volumes Surge – Bullish for the BTC Price?

In recent weeks, Bitcoin spot and derivative trading volumes have soared along with the cryptocurrency’s fast recovery from early monthly lows under $20,000.

This means that the current upward movement, which saw Bitcoin surpass $28,000 this week for the first time in nine months, was supported by a lot of conviction.

According to CoinGecko, Bitcoin has increased by about 4% in the past 24 hours, 13.5% in the past seven days, and 19% in the past 30 days at its current levels in the mid-$28,000 range.

From mid-March, the price of bitcoin has been rising due to worries about the viability of the US (and the rest of the world’s) financial system in the wake of several well publicised bank failures and a dovish turn by the US Federal Reserve in response.

The US central bank softened its tone on the outlook for additional interest rate hikes this week, despite the fact that interest rates were still increased by 25 basis points this week due to inflation that is still running well above target. Markets are aggressively betting that a rate-cutting cycle will begin in the second half of 2022.

Spot & Derivative Volumes Surge in Bull Market Tell

Further evidence that a new Bitcoin bull market has begun comes from the most recent increase in trade volumes.

The 7-day Moving Average of Bitcoin trade volumes on exchanges reportedly reached about $24 billion earlier this week, its biggest level since mid-2021, according to statistics provided by The Block.

Even though March hasn’t even ended, the amount of Bitcoin futures traded on exchanges this month is already close to $1 trillion, the biggest level since last September.

It’s likely to reach its highest point this month since July or June of last year. A derivative of the underlying spot Bitcoin asset is bitcoin futures.

The promise that an asset will be provided at some point in the future is represented by futures. Commodity futures are traded by industrial companies to guarantee their raw material supplies, but they are sometimes utilised for speculative purposes, like in the case of Bitcoin.

Also increasing this month are the volumes on the bitcoin options market. Although March hasn’t even ended, it has already seen more Bitcoin options trade than any other month since May of last year (at around $25 billion).

Using Bitcoin options, investors may wager on or protect themselves from price fluctuations. Institutions and professional trading desks account for a larger share of total trading volumes since they are a more difficult asset class to comprehend and trade.

So, rising institutional trading activity may be indicated by rising volumes of Bitcoin options. The recent increase in Bitcoin option open interest is another sign that institutions are investing more heavily or in larger amounts.

Open interest reached $12.14 billion on March 22nd, its largest amount since November 2021, when Bitcoin last reached all-time highs.

What Does This Means for BTC?

The recent Bitcoin rally, which has seen prices soar by an astounding more than 70% for the year, is much more than just a passing trend, according to soaring volumes across spot and derivative markets.

In fact, as described in this article, the rise in Bitcoin trading activity coincides with a number of encouraging on-chain indications that have a proven track record of identifying when Bitcoin will switch from a bear to a bull market.

Many investors were already of the opinion that the bear market in 2022 was over before US bank difficulties and the Fed’s ensuing dovish tilt added additional spice to the 2023 surge.

Experts have identified $30,000 as the next significant barrier, and technicians have cautioned that 10% pullbacks continue to be a concern. There is little doubt that the upcoming months will be turbulent.

However, favourable fundamental trends (rising demand for Bitcoin as a substitute for fiat currency and amid expectations for Fed easing), favourable on-chain signals (like rising network activity), and favourable trading trends (indicating more investors stepping in to buy) should continue to be a tailwind for the foreseeable future.

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