It’s been a rollercoaster of emotions for crypto traders.
The last month started with prices plummeting and not much sign that they were going to recover anytime soon, but by the end, it seemed like old times again as cryptocurrency values increased in all but one market.
Cryptocurrency trading volumes have been on a decline over recent months which is really unfortunate because this can be interpreted as an indicator of how people are feeling about Bitcoin or other cryptocurrencies moving forward (and/or if some new coin could overtake them).
However, what’s even more worrying than these declining rates is just how sharp the drop-off has been at present: In July alone spot trade volume fell sharply from $5 billion to less than half ($2 billion) its previous level.
Let’s Talk Numbers – July, You Go First!
Despite the sharp recovery of cryptocurrency prices in July, spot trading on crypto exchanges plummeted.
With the spot volume of crypto trading dropping by 31.5 percent month-over-month, it looks like “crypto winter” is finally coming to an end!
Roughly two years ago (February 2018), when CryptoCompare first started tracking monthly data on cryptocurrency exchanges and transactions, they found that there was more than $2 trillion worth of trade activity happening each day in January that year alone.
But now – with a strong bear market behind us as well as some regulatory clarity around Bitcoin ETFs from regulators such as the SEC – we’re seeing signs suggesting this might be ‘the time for cryptocurrencies to return back up again towards their all-time highs before last year’s bubble popped.
This has been attributed largely due to increased scrutiny from national regulators all across the world coupled with various hacks and scandals involving exchanges some such as Binance who saw 800,000 Bitcoin or 18 percent of its total reserves stolen.
The cryptocurrency market has seen some interesting changes in July.
Bitcoin prices started the month with a bearish momentum but ended it by gaining more than 18 percent of its value, which is quite impressive considering that Ethereum added 11.2% to its price from last month as well!
The Downward Trend
The crypto market’s liquidity is still low, but there are signs of improvement.
The top 3 exchanges in the world handled a combined $1 trillion this March while lesser-tier ones saw lower volumes than usual; Binance led with its 31% decline to just over half a billion dollars and Huobi Global followed closely at about one hundred million less.
Cryptocurrency markets have seen higher volatility recently as well as stagnating prices that might be indicative of bullish sentiment or fatigue from traders waiting for the next big move by institutional investors who may see more potential profit opportunities elsewhere outside cryptocurrency markets.
In July 2021, the crypto markets were experiencing a significant decline in derivatives trading volume. Currently, at $2.5 trillion, this is down 22% from last month’s total of $3 trillion and has contributed to the decrease seen in market volatility (~22%).
However, while many speculate that derivative traders are decreasing their participation due to increased regulation (i.e., SEC), it appears as though these increasing regulations have had an opposite effect on the dominance of derivatives-based trades which now comprise 56% ($1 quadrillion) of all transactions!
In addition, heavy turbulence throughout cryptocurrency exchanges caused volatile prices for cryptocurrencies with some coins reaching over 90%.
Given such high levels of unpredictability among investors–many who continue to buy now may have to hold them for a while.
The number of new Bitcoin futures contracts increased last month, with a weekly average of $17.7 billion in open interest and an increase of 7.5%. While the ETH futures products had less growth than BTC’s at 2.4%, they still managed to grow over time as well.
Further analysis on how crypto markets are performing has been released this week from data collected by exchange operator CME Group Incorporated (CME).
The report highlights that both bitcoin-based instruments and Ethereum contract equivalents have seen increases in activity across different sectors including trading volumes, open positions held within these exchanges, etc.
The Binance derivatives market has been a great success for the exchange, but regulators are looking to a crackdown.
The company is expanding quickly and trying its best in Europe while still working with US officials who have yet to act on their proposed regulations which could be huge blows for both parties given how much they’ve grown since last year.
Binance’s popularity as an international stock-trading platform continues to grow at a rapid pace alongside other leading cryptocurrency exchanges such as Coinbase and Gemini.
However, it remains unclear whether or not this increasing demand will put some pressure on regulatory agencies like SEC (Securities Exchange Commission).
That would then require them to provide more transparency about trades made by investors from across the world.