In July, cryptocurrency derivatives trading on centralized exchanges surged to $3.12 trillion, marking a notable 13% monthly increase, according to CryptoCompare, a research firm. This surge comes as cryptocurrency prices exhibit signs of recovery following the recent market crash.
The derivatives market now constitutes 69% of the total cryptocurrency trading volume, up from 66% in June. This shift helped drive the overall cryptocurrency trading volume on exchanges to reach $4.51 trillion in July, as reported by CryptoCompare. Notably, derivatives exchanges reached a peak of $245 billion in trading volume on July 29, surpassing June’s highest daily trading volume of $223 billion by 9.7%. In contrast, spot cryptocurrency trading experienced a slight dip, reaching $1.39 trillion in July, reflecting a modest 1.3% decline and marking its lowest point since December 2020, as per CryptoCompare’s findings.
The cryptocurrency market experienced a sharp decline in May and June due to concerns regarding high inflation and potential interest rate hikes by the Federal Reserve, prompting investors to offload risky assets. Following the fall of a major pair of tokens, certain cryptocurrency lenders froze customer withdrawals, and several cryptocurrency companies downsized their workforce. Although prices have somewhat recovered, with Bitcoin registering a 17% increase in July, it currently stands at approximately $24,300, a considerable distance from its all-time high of $69,000 in November.
CryptoCompare noted, “The rise in derivatives trading volume indicates an increase in speculative activity as traders believe there is room for further upside in this rally.” They also highlighted the absence of a U.S. Federal Reserve meeting in August, which has contributed to this trend. Additionally, traders are speculating on the forthcoming Ethereum merge, a significant upgrade to the Ethereum network anticipated in September. Ethereum’s price has risen to around $1,900 from its June low of $880.
Furthermore, CryptoCompare reported that BinanceUSD, a stablecoin issued by Paxos in partnership with Binance, gained prominence in July. Spot trading volumes for bitcoin-to-BinanceUSD trades exceeded those for bitcoin-to-dollar trades for the first time. Binance maintained its position as the leading exchange, commanding 54% of the market share, while Atom Asset Exchange (AAX) emerged as the second-largest, with trading volume increasing by 26.5% in July. On a related note, U.S. exchange Coinbase reported a larger-than-expected quarterly loss on Tuesday, with trading volumes more than halving in the second quarter of 2022.