Cryptocurrency Volumes are on the Rise, But Who is Trading?

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Jun 18, 2020


Cryptocurrency trading volumes are on the rise as institutional investors appear to be coming back into the marketplace. Derivative contracts, which track the underlying movements of cryptocurrencies such as bitcoin, hit a new record high in May of $602 billion, according to United Kingdom-based data aggregator CryptoCompare.

Stock like products such as the Grayscale Bitcoin Trust has also seen a rebound in volume in 2020. Which points to more institutions getting into the fray. 

May Volumes Rebound Sharply

According to CryptoCompare, derivatives volumes hit a fresh all-time high in May across all crypto trading platforms. Cryptocurrency derivatives include futures, options on futures, contracts for differences as well as stock-like trust that hold cryptocurrency assets.

According to CryptoCompare, the crypto-derivatives market is also taking a larger portion of the total cryptocurrency trading pie. CryptoCompare reports that total derivatives volume represents 32% of the market in May compared to 27% in April. Options volumes are rising which likely means that institutions are now more active. In May, the Chicago Mercantile Exchange (CME) reported that total options volumes reached an all-time high of 5,986 contracts

This volume level is 16-times that options volume that was seen in April. CME reported that futures volumes recovered substantially rising by 36% in May. The most impressive number was the rapid increase in CME bitcoin derivatives which saw volume soar by 59% to hit 7.2-billion. This was greater than any other derivatives exchange. This large increase in liquid regulated futures contracts shows that institutions increasing their exposure to the cryptocurrency market.

grayscale bitoin trust

Volume has also increased in the stock-like asset trading space. The volumes on Grayscale Bitcoin Trust, which is the only stock-like asset that can be used in the United States to trade bitcoin, saw a substantial rebound in volume in 2020, after dipping to historical lows in the Q4 of 2019.

The volume as of mid-June is 60-million shares which are half the size of May and on track to test the highs which were achieved in both May and March. The upward trajectory of the volume likely means that institutional traders are using the Grayscale Bitcoin Trust to take a long position in bitcoin. 

Rise Volumes Have Not Led to Rising Prices

Despite the surge in volumes across all cryptocurrency derivatives exchanges, this has not translated into higher prices. Bitcoin has yet to test the 2020 highs of 10,495. The exchange rate versus the dollar has seen BTC/USD chop around in a 2,500 point range since hitting a high of 10,495 in February of 2020.

What Does Rising Volume Do?

Rising volume is very important for liquidity. Higher levels of volume mean that a trader can enter and exit with very little slippage. An increase in volumes will attract more institutional traders as there is less fear that they will not be able to exit a position if the market moves against them. 

The Bottom LineThe surge in cryptocurrency derivatives is a good sign for the cryptocurrency market. Liquid derivatives will attract institutional traders who are looking for liquid markets where there is little slippage for entering and exiting. The news that crypto trading derivatives volumes hit an all-time high in May should attract more traders to this market, which will be captured in the June and Jule volume figures.

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PR Manager

Press release about recent ICOs, announcement from startups, new cryptocurrency launch by firms and unlike.

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