The ratio between daily trading volumes of Bitcoin (BTC) in the spot and derivatives markets dropped to an 11-month low, signaling the resumption of speculative activity in the cryptocurrency market.
Bitcoin (BTC) Spot-Derivatives Volume Rate Drops To 11-Month Low
The drop signals renewed risk appetite in the crypto market. According to data tracked by South Korea-based blockchain analysis firm CryptoQuant, the rate has dropped nearly 80% in three months, reaching the level of 0.117 last seen on May 16, 2022.
This drop comes amid the 70% year-to-date increase in Bitcoin's price, signaling an increased risk appetite in the crypto market and the potential for price volatility.
The drop in the spot-to-derivatives volume ratio has been quite sharp since Bitcoin faced significant resistance above $28,500 on March 21. This shows that speculators have been getting into Bitcoin more quickly than individual investors and long-term holders lately.
The spot market is a platform where financial instruments are traded for instant delivery. Derivatives are contracts for a group of products, including futures and options, whose value is tied to or derived from an underlying asset.
It includes leverage that magnifies both profits and losses. Derivatives are traded for future delivery.
Spot market activity is often associated with long-term investors. At the same time, derivatives are considered a medium for sophisticated investors and speculators who have an abundant capital supply and make risky leveraged bets to grow returns.
*Not investment advice.
