Spot Markets, Not Leverage, Fuel Bitcoin Price Rise Amid Slight Derivative Settlements


Hot spot markets are mainly fueling bitcoin’s recent rally as the major cryptocurrency trades at three-year highs around $ 15,500, suggesting the bull market may have room to continue.

Unlike previous rallies, derivatives markets are playing a much less prominent role, demonstrated by moderate liquidation volumes.

The presence of derivatives in the ongoing bitcoin rally is “attenuated from previous run-ups,” said Matt Kaye, managing partner of Santa Monica-based Blockhead Capital. Speaking to CoinDesk, Kaye said, “The market is clearly dominated by the spot market and it appears that most of the offers are coming from the US,” continuing a trend reported by CoinDesk in May.

On Thursday, BitMEX, a cryptocurrency derivatives exchange known for attracting unorthodox and highly leveraged traders, reported $ 54 million in bitcoin futures contracts liquidated during the most recent rally, well below liquidation volume yet. mild of $ 75 million reported on Oct. 21 when bitcoin hit new annual highs, surpassing $ 13,000, according to Skew.

Big liquidations may not happen until the leading cryptocurrency surpasses its all-time highs of just under $ 20,000, said Kyle Davies, co-founder of Three Arrows Capital, in a direct message with CoinDesk. “Frankly, there isn’t much leverage on the market anyway,” he said.

Significant price movements typically trigger large-scale liquidations in the typically over-indebted cryptocurrency futures markets. But weak liquidations during bitcoin’s recent rally signal that typically prominent derivatives markets have taken a back seat and the spot market has the wheel.

Confirming the calm of the derivatives markets amid the skyrocketing bitcoin price action, is that in the last 24 hours, at 14:35 UTC on Friday, less than $ 500 million in positions were liquidated. bitcoin futures, on seven leading trading platforms when bitcoin was approaching $ 16,000. The largest reported liquidation of $ 5.97 million took place on BitMEX, according to derivatives data aggregator Bybt.

According to Davies, the regulatory problems faced by major leveraged trading exchanges, including BitMEX, OKEx and Huobi, explain the moderate influence that derivatives markets play in the current bitcoin rally.

The fact that clearance volumes are low relative to bitcoin price movements could be an encouraging sign for bitcoin bulls, according to Aditya Das, a cryptocurrency market analyst at Brave New Coin.

“The low funding rate and relatively low number of liquidations could be read as a positive sign that this rally may have legs and is not close to overheating due to speculators,” he told CoinDesk in a direct message.

The market could also signal that futures traders simply “missed the big move,” Das added.

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