Bitcoin Spot Volumes vs Futures Volumes? Here’s how BTC had reached $10k in recent rally

Bitcoin Spot Volumes vs Futures Volumes? Here's how BTC had reached $10k in recent rally

Bitcoin’s third halving is finally over after months of excitement and waiting. The block rewards for the miners are down to 6.25 BTC, and the long-term necessary changes will be observed when space is adjusted to the reduced supply of Bitcoin.

Before getting too far ahead of us, let us examine some of the adjustments that have taken place over the months of May and April in terms of exchange volume.

Longhash’s latest post indicated that bitcoin spot volumes had risen to rates seen back in 2017 over the past few months.

According to data, both Binance and Coinbase had a high level of activity in terms of BTC volume. Binance’s monthly amount of BTC / USDT was over 2.5 million BTCs, outperforming its last high of 816,000 BTCs back in January 2018.

Coinbase also showed a similar pattern and its monthly volumes remained just 118,000 BTC lower than the volumes seen during January 2018. It is important to remember that the price of Bitcoin in January 2018 was 48 per cent lower than the current value of Bitcoin.

Spot Volume vs Futures Volume; which one is a better identifier of demand?

Now, technically, rising volumes on both the spot and future markets indicate user demand, but there is a crucial difference. On spot exchanges, investors are unable to buy crypto with borrowed capital and there is no need for additional leverage to invest in Bitcoin with debt. Spot volume therefore indicates organic volume and demand backed by capital.

Today, orders placed on futures are always over-leveraged, pushing up the Bitcoin price continuously. The key issue is that, when the valuation plummets, those orders are removed and the uptrend registered is not based on a strong foundation.

Hence, the issue with such buy order is that it leaves Bitcoin to be susceptible to large corrections during a bearish rally.

Recent Bitcoin rally was driven by spot volumes

The rise in spot volumes observed in the charts indicated that retail investors had a significant role to play in the April-May bullish rally for Bitcoin. Bitcoin also surpassed the $10,000 mark, but sadly, it did not carry consolidation.

As the volume of spots recovered faster than the trading activity in the Bitcoin futures exchange market, institutional demand also began to rise rapidly.

Now, an increasing volume of spots has been relatively evident provided that Bitcoin has also reported the highest number of active entities since December 2017. Active entities have shown the number of unique addresses entering the region and are thus reflective of the fact that retail investors have been particularly interested in the last few months.

While the common consensus expects the trend to slow down now after halving, it will be interesting to analyze retail investors from here onward.

Utkarsh Gupta: Professional journalist with a proven experience of working in the online media industry. Experienced in Web Content Creation, Editing, Publishing, Journalism, and Creative Writing.