Bitcoin’s Spot-to-Derivatives Trading Volume Ratio Slides to Lowest in 11 Months

The ratio between bitcoin’s (BTC) daily trading volumes in spot and derivatives markets has slipped to an 11-month low, signaling renewed speculative activity in the crypto market.

The ratio has tanked by nearly 80% in three months, reaching a low of 0.117, the level last seen on May 16, 2022, according to veri tracked by South Korea-based blockchain analytics firm CryptoQuant.

The decline comes amid a 70% year-to-date rise in bitcoin’s price and indicates improved risk appetite in the crypto market and potential for price volatility.

The slide has been quite sharp since bitcoin first ran into crucial resistance above $28,500 on March 21. It shows speculators have recently piled into bitcoin at a faster rate relative to retail investors and long-term holders.

The spot market is a platform for trading financial instruments for immediate delivery. Derivatives are contracts of a group of products, including futures and options with values dependent or derived from an underlying asset and involve leverage that magnifies both profits and losses. Derivatives are traded for future delivery.

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The spot market activity is usually equated with long-term investors. At the same time, derivatives are considered a proxy for sophisticated traders and speculators who have ample capital supply and make risky leveraged bets to magnify returns.

Edited by Parikshit Mishra.

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