Bitcoin Spot & Derivative Trading Volumes Surge – Bullish for the BTC Price?

Bitcoin spot and derivative trading volumes have increased in recent weeks as the cryptocurrency has rallied from early monthly lows under $20,000. That means the recent surge higher, which saw Bitcoin surpass $28,000 this week for the first time in nine months, is well-founded.

According to CoinGecko, Bitcoin is up roughly 4% in 24 hours, 13.5% in seven days, and 19% in 30 days at mid-$28,000 levels. Following a succession of high-profile bank failures and the US Federal Reserve’s dovish tilt, bitcoin’s price has been rising since mid-March.

The US central bank tempered its tone on further interest rate hikes this week, and markets are betting strongly on a rate-cutting cycle starting in the second half of 2022. The latest spike in Bitcoin trading volumes adds to the grounds to conclude that a new Bitcoin bull market has arrived. The Block said that Bitcoin exchange trade volumes reached $24 billion this week, the biggest level since mid-2021.

The amount of Bitcoin futures traded across exchanges in March is already close to $1 trillion, the biggest since September. It may peak this month. Bitcoin futures derive from spot Bitcoin.

Futures ensure asset delivery. Industrial firms sell commodity futures to secure raw resources, but they also speculate, like with Bitcoin. Bitcoin options market volumes have increased this month. March has witnessed the most Bitcoin options trade since May, at over $25 billion.

Bitcoin options let investors wager on or hedge price movements. Institutions and professional trading desks trade more of them because they are more complex. So, rising Bitcoin options volumes may indicate institutional trading. The rise in Bitcoin option open interest suggests institutions are investing more.

Open interest reached $12.14 billion on March 22, its biggest amount since November 2021, when Bitcoin reached all-time highs. Volumes in spot and derivative markets indicate that the present Bitcoin rally, which has seen prices rise more than 70% for the year, is not a fad.

Indeed, the surge in Bitcoin trading activity coincides with a multitude of positive on-chain signals that have a strong track record of predicting when Bitcoin will transition from a bear to a bull market.

Many investors believed 2022’s bear market was gone until US bank difficulties and the Fed’s dovish move fueled the 2023 rebound. Analysts say $30,000 is the next major hurdle, while technicians say 10% pullbacks are always a risk. Future months will be turbulent. But positive fundamental trends (rising demand for Bitcoin as an alternative to fiat currency and expectations for Fed easing), positive on-chain signals (like rising network activity), and positive trading trends (suggesting more investors buying) should remain a tailwind for the foreseeable future.