On-Chain data shows that derivative exchanges have witnessed increased activity as Bitcoin surged towards the $29,000 mark.
The ratio of trading volume between Bitcoin spot and derivatives has been relatively low in recent times.
According to an analyst in a CryptoQuant post, the recent price increase is primarily attributed to derivatives. The indicator of interest here is the “Trading Volume Ratio”, which measures the ratio between Bitcoin trading volume on spot exchanges and derivatives exchanges.
“Trading volume” in this context refers to the total amount of cryptocurrency that investors transact/move on a platform or group of platforms.
When the value of the trading volume ratio is high, it indicates that spot exchanges are experiencing a high level of activity compared to derivatives platforms. Conversely, low values of the indicator suggest that derivatives exchanges are currently experiencing relatively high volume.
Here is a chart depicting the trend of the Bitcoin trading volume ratio over the past year:
[Image]The value of the metric appears to have been quite low in recent days | Source: CryptoQuant
As shown in the chart above, the Bitcoin trading volume ratio has been on a downward trend since March, moving mostly sideways at fairly low levels.
This suggests that during this time, there has been little spot activity in the market, at least compared to the volumes observed by derivative exchanges.
Although the price of the asset witnessed a strong surge towards the $29,000 mark in the past day, the ratio interestingly did not experience an increase, indicating that the spot volume remains low in relation to derivative activity.
This fact suggests that the recent rally has actually been driven by derivatives rather than the spot market. In the past, rallies accompanied by increasing spot trading volumes were more likely to sustain over a longer period.
From the chart, it can be seen that the increase in Bitcoin price in January of this year began when the trading volume ratio was at a relatively high level.
Similarly, the recovery rally in March also began when the indicator showed an increase (albeit much smaller). As mentioned earlier, the indicator plummeted shortly after this rally and has remained at a low level since then. During this time, BTC has not been able to sustain any significant movement.
However, in the past day, it was evidently different, as the rapid price increase was unlike anything the asset has shown lately. Nevertheless, the fact that spot volumes are still low means that the rally “appears weaker compared to solid rallies led by the spot market at $16,000 and $19,000,” according to the quantification.
It remains to be seen whether the ratio will continue to remain low in the coming days or if there will be an increase in spot activity.
BTC Price
At the time of writing this article, Bitcoin is trading at around $29,100, representing a 12% increase in the past week.
[Image]BTC appears to have witnessed a strong surge in the past 24 hours | Source: BTCUSD on TradingView. Featured image by “Kanchanara” on Unsplash.com, Charts from TradingView.com, CryptoQuant.com
