Trading activity increased in January but derivatives volume grew faster than spot markets

Decentralized Finance (DeFi) refers to digital assets that facilitate services or products not controlled by any central entity. Investments in DeFI poured $2.7 billion in 2022, up 190% from 2021.  With the overall funding activity falling in the crypto space, the DeFi activity stands out.

Since the beginning of 2023, a broader crypto market recovery witnesses a robust recovery in Spot and Futures all through January, and February also added to the same story. But, one point to consider is the growth of derivative products as compared to the Spot market. In late January, bitcoin derivatives entered contango, a market situation when futures prices exceed the spot.

Data from crypto.com suggest the rise of derivative volume even if there is an overall decline in the crypto market.

Crypto derivative volume for January hit $2.04 trillion, almost twice that of December. While the number of short liquidations spiked, signaling the danger of betting against bitcoin in a bull market. Derivative trading constitutes 70.3% of the entire crypto market, up from 68% in December as per CryptoCompare data.

In January, Bitcoin and Ethereum gained 40% and 32% respectively in January along with a large trading activity in the derivative market that gives rise to the theory of price rise due to derivative market speculation than spot market accumulation.

Binance is the largest derivative exchange in January with $1.26 trillion in volume, followed by Bybit which had a 115% increase to $301 billion.

In a recent development, Bitget, a leading crypto derivatives exchange and copy trading platform announced integration with TradingView, a charting and trading platform.