The bullish trend of Bitcoin persists, and derivatives
market volume has seen a surge in activity. Prices of BTC futures are now
surpassing those in the spot market, indicating that traders are becoming more
trusting in derivatives.
A Significant Reduction in Bitcoin Derivatives Trading Volume Is Forecasted
for 2022
In 2022, Bitcoin experienced a considerable bearish trend,
resulting in a sharp drop of 60% in its value, alongside a dramatic decrease in
the trading of bitcoin futures and options. The conclusion of FTX in November
further weakened market confidence, and notable withdrawals from the
derivatives market followed, along with long liquidations and a strong bearish
orientation.
Figures from TheBlock outline that Bitcoin futures volumes were around $1.3 trillion in December 2021, according to data from major exchanges.
However, this dropped off significantly to $620 million in November
2022, a decrease of more than 50%. This illustrates a sharp fall in trading
volumes on major exchanges.
In January 2023, however, there was a reversal in the luck
of Bitcoin, which is likely to be the main reason. The price of Bitcoin has been
gradually rising, reaching $24,000 over the past few days, and the derivatives
market appears to be very optimistic.
An Increase In On-Chain Activity Is Expected In 2023
ProfChaine, a market analyst, posted on Twitter, claiming that the derivative
market is reversing with a bullish bias and much short selling. To support his
opinion, he shared several charts depicting the 3-month moving annualized basis
of bitcoin futures (illustrated in blue).
The rate of change in the cost of futures contracts in
comparison to the present price can be identified using this metric. If traders
are looking to purchase futures at a higher price than the spot rate, the rate
will be positive, whereas if they expect the price to decrease, the rate will
be negative.
The FTX saw a dip in the metric at the beginning of November
because traders exited futures trading. However, the month of January saw a
marked increase because of the rising value of Bitcoin. This is reflected in
the chart.
The open interest leverage ratio of Bitcoin futures is
another factor to consider. This metric quantifies the number of unsettled
derivatives contracts during a given period. When it rises, it is an indication
of new traders placing new positions on derivatives.
The graph displays an increase in open interest leverage since the start of the year, which is in stark contrast to the drop in 2022 when market volumes were low. The rise in futures trading is a positive sign for the market and is often seen as an indication that the bull market may continue. [st]
source: Bitcoinist
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