CryptoCompare reports that investors in cryptocurrency have increased their exposures to derivatives markets. In July, trading volume on central stock exchanges rose to $3.12 Trillion, up 13% compared to the previous month.
The trading volume of derivatives on major exchanges topped $245 billion on July 29. This is 9.7% more than the daily high of $223 trillion in June, according CryptoCompare data.
There were signs of recovery following a crash at futures/options contracts.
Crypto derivatives are financial instruments that can be used as secondary contracts to extract value from an underlying asset like Bitcoin.BTC), Ethereum (ETH), or other alternative currencies.
Futures are investment contracts which allow investors to gain exposure without actually owning the asset. Futures are a way for investors or traders to speculate about the future price of an asset.
Options give traders the unique opportunity to purchase or sell crypto tokens at a fixed price. An option contract’s price will depend on when it was purchased, the strike price and the expiry date.
CryptoCompare says that the rise in derivatives trading volume is indicative of an increase in speculative activities as traders believe there’s more upside to this rally.
Investors sold cryptocurrencies sharply after previous Fed rate rises, inflation, and war between Russia and Ukraine.To cause the cryptocurrency market’s plummet.
Inflation data from the United States was lower than expected, which boosted market risk appetite. Cryptocurrencies have since recovered.
Bitcoin (BTC), which quickly crossed $24,000, and Ether(ETH) also managed a quick climb back to above $1,900 in the intraday.
CryptoCompare noted that the market is also worried about the potential market to merge and upgrade Ethereum. This upgrade is expected increase Ethereum’s network speed, which could lead to Ethereum strengthening.
Open interest in ETH derivatives is now higher than BTC.
The derivatives market now accounts for 69%, an increase from 66% in June.
Retail and institutional investors alike have found value-adding derivatives attractive due to their potential. Although U.S. law is still ambiguous, most businesses have found that forays into the derivatives markets are a better investment option to capitalize on asset price swings to make profit.