Bitcoin’s Recent Price Drop Led to a $198 Million Record Trading Volume

Monday saw a complete smashing of all previous records in terms of volume as Bitcoin’s price dropped. A lot of investors did some serious hedging on their positions as the selling went on during the day. The number came in as a total of the trading amount that went through five exchanges. These include Deribit, CME, LedgerX, OKEx, and Bakkt. The numbers were shared by Skew Market, a research firm working in crypto derivatives. The previous number that they shared was from February 11th which was $171.3 million!

The biggest contribution to the overall trading came from the world’s largest crypto exchange, Deribit. It had an 86% share of Monday’s total volume, i.e. $170 million. CME got a total trading volume of $2.1 million, and no contract trades were made by Bakkt, the exchange belonging to Intercontinental Exchange (ICE).

An option contract is basically a type of derivative that is based on the real value which belongs to the instrument in question. This provides the right to buy or sell at the same value as that of the instrument before its expiry. It does not give any obligation for the user to actually make the sale or purchase. A put option only provides the right to sell and a call option only provides its holder with the right to buy.

On Friday, the value of Bitcoin was well over $9000 and the trend showed chances of further improvement as the weekend progressed. However, the hit came all of a sudden when the price suddenly dropped sharply from a steady $9,900, coming down by a huge 9% to $9000 flat. The price continued to drop beyond that point and by Monday, it had reached the two-month lowest point of $7,640.

The initial drop, according to analysts, may have been due to a huge $120 million sell-off by scammers PlusToken. The China-based scammers have posed as a crypto wallet in the past and actually managed to steal around $2 billion from different investors. They made promises to investors against their investments and ended up swindling money from them.

In June 2019, the police managed to arrest six people from the group of PlusToken masterminds. However, the arrest did not lead to the recovery of the huge stocks of BTC, Ethereum and Tether from their custody. In total, there were 180,000 BTC, 111,000 tether, and 6.4 million Ethereum!

The sudden drop in price led to the expected panic that followed and investors dropped their holding frantically over the weekend and on Monday.

The biggest benefit that has come from this massive drop in BTC price is the ample opportunity to invest. Both short-term and long-term trading investors can buy BTC at a huge discount, considering how consistently the price of bitcoin has been rising.

The evidence of the rise has been present since the start of the year. Deribit, just in the last month, saw daily volumes of $100 million. This is double the amount that they saw during December and January.

Su Zhu, the CEO of Three Arrows Capital was quoted saying, “There’s been an explosion of interest from investors, intraday traders, and miners in BTC options on Deribit the past few months”.

Another change that came along with the drop in Bitcoin’s price was the increase in the sum of non-expired options contracts that were being traded on the open market. According to crypto analytics firm Skew, the value of trading that happened on options contracts rose from $798 million, the final recorded value of Sunday, to $841 million on the following day.

This is not at all surprising, considering the rise that the crypto market witnessed during the beginning of the year. In the first six weeks alone, the trading of the open positions skyrocketed from $250 million to $950 million! And the fact that it was not an anomaly also proves the point. The trading values have remained just as high throughout the following weeks until today.

The future for Bitcoin does seem to be quite strong, regardless of the price slump over the weekend. The uncertainty of what the future will bring is going to play a big role in strengthening the value of bitcoin further.

A major event that will ensure the steady increase in the value of bitcoin in the coming months will be the Bitcoin halving event in May. However, that is not the only thing that will push the price upwards as time passes by.

The coronavirus pandemic is putting more and more importance on the benefits of having a cryptocurrency. The markets are certainly responding, and this effect is already somewhat visible in the trading patterns that have emerged since the outbreak.

Not to add “fuel” to the fire but Russia’s willingness to go on an all-out war with Saudi Arabia over oil prices is also going to further increase the value of Bitcoin.

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