Bitcoin Spot Volume Continues to Decline
Over the past seven days, bitcoin spot volumes experienced an additional 8% decrease, reaching a 35-month low. This decline was primarily driven by reduced activity on Binance, while other spot exchanges maintained relatively stable trading volumes.
K33 Research’s Senior Analyst, Vetle Lunde, and Vice President, Anders Helseth, highlighted these trends in their recent report. They noted that ongoing legal battles between Binance and the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) might be discouraging market makers from engaging with the platform, contributing to the decline. This situation casts a shadow over the broader cryptocurrency market. Interestingly, despite facing a lawsuit from the SEC, rival crypto exchange Coinbase saw a 9% increase in bitcoin spot trading volume during the same month.
Bitcoin Leads a Spot-Driven Rally
Despite the decline in trading volume, bitcoin emerged as the leader in a spot-driven rally during the period. Its prices surged by 8% over the past week, reaching a three-week high. Ether and Binance Coin (BNB) also experienced gains of 6% each during this timeframe. Additionally, Toncoin, a relatively new cryptocurrency, entered the top 10 by market capitalization after witnessing a remarkable 45% increase in just seven days.
Mixed Sentiment Among Institutional Traders
Lunde and Helseth also observed mixed sentiment among derivatives traders, particularly on the Chicago Mercantile Exchange (CME). They noted a growing bullish outlook among traders in bitcoin futures, marking a shift from the bearish sentiment that had prevailed since mid-August. In the past week alone, there was a substantial 19% increase in bitcoin open interest from active market participants, accompanied by rising futures premiums.
However, the derivatives market isn’t entirely bullish. CME’s ether open interest declined by 17% over the past week, with ether futures maintaining a relative premium discount compared to bitcoin futures. This suggests that speculators are still less enticed by the possibility of an ether Exchange-Traded Fund (ETF) approval and its potential impact on the market.
Crypto-Specific Events Drive Market Direction
In a notable shift from earlier trends, 2023 has seen the direction of the crypto market heavily influenced by crypto-specific events. Lunde and Helseth argue that factors like short squeezes, ETF-related news, sell-side pressures from bankruptcy estates, and actions by the U.S. government have become dominant market influencers. This shift is evident in the divergence of bitcoin’s correlation with traditional indices like the S&P 500 and the DXY since the beginning of the year.
As the U.S. Federal Reserve prepares to announce its latest interest rate decision, expected to include a pause at 5.5%, any short-term volatility in the crypto markets is anticipated. Nevertheless, Lunde and Helseth suggest that the reduced correlation with traditional markets has made macroeconomic data less relevant for current trading decisions, likely resulting in only temporary impacts.
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