Crypto derivatives trading has set a record. Why is this a cause for concern?
Interest in trading derivatives has surged to a new high with a volume of $1.3 trillion, accounting for 80% of trading activity.
The increase in speculative trading is concerning because it makes the market less stable. When unexpected news arises, traders’ positions may be liquidated due to high volatility, leading to even sharper price reactions.
This can also attract large players looking to manipulate prices for their benefit.
On October 16, we saw a prime example of increased volatility when short positions of traders were liquidated. In just 30 minutes, Bitcoin’s price surged from $28,000 to $30,000 and then dropped back to $28,000.
Meanwhile, traditional spot trading only amounted to $336 billion in September.
This drop in spot trading is because people are holding onto their Bitcoin and not selling it at current prices.
Long-term holders, who’ve had their coins for at least six months, now own a significant 14.7 million BTC.
Holders aren’t selling, but there are also factors holding back mass purchases:
- Confusing crypto regulations
- The FED’s tightening of monetary policy
- High yields on US Treasury bonds
These factors might maintain a high level of uncertainty throughout the year.
On a positive note, in the last six months, the 99Bitcoins online obituary hasn’t recorded a single article predicting the demise of Bitcoin. Moreover, there is a growing number of forecasts suggesting its medium-term growth.
