Bitcoin Volume Study - Futures vs. Spot

COINBASE:BTCUSD   Bitcoin / U.S. Dollar
Over the course of the last 6 months Bitcoins spot volume has been plummeting while future volume has been rocketing on the backburner.
The two custom indicators above are a perfect display of this. The BTC World Volume displays the total traded Bitcoin Volume over the top 17 Bitcoin Exchanges and currency pairs. It then separates the futures market from the spot traded currency pairs.

Spot volume is shown in green.
Future Volume is shown in red.

The BTC Future Dominance indicator displays the percent value of the dominance of traded futures throughout the entire market.

Notice that the futures have remained dominate for the last 5 months, just after this ever-lasting bear trend started. Currently over 70% of the total volume in the market is futures alone.

Without separating the futures market from the BTC World Volume , it just appears that the total traded volume has increased dramatically. In many markets this is a very good sign, unfortunately that is not the case here at all. People trading futures are only trading mere contracts of Bitcoin and no actual transactions of Bitcoin are taking place. All in turn, meaning that the future traded volume does not affect the price of bitcoin.

What does affect the price of Bitcoin is the spot market. This is the buying and selling of actual Bitcoin; not contracts. The BTC World Volume indicator above shows how spot volume (green) has been plummeting since the all time high late last year. Just about the same time the futures market started its takeover.

Based on this analysis, I believe the spot market must redeem itself before there is any solid reversal for Bitcoin . However, at this time there is very little reason to trade actual Bitcoin over the futures market.
Here are just a few of those reasons:
  • Volatility is dying, which is likely due to the futures market anyways. As it takes volume from the spot market that actually affects the price.
  • Fees are significantly lower in the futures market. Market Makers are even paid for limit orders. This significantly beats the hefty percentage-based fees on traditional exchanges.
  • High leverage. Some futures exchanges offer up 100x leverage on some currency pairs. Most traditional crypto exchanges don’t even offer 2x on the spot market.
  • Bitcoin has been in a clear downtrend for over 6 months. There is no reason for people to buy and HODL at the moment.
  • There is no solid news for Bitcoin. I believe a catalyst such as an ETF announcement may be necessary for Bitcoin to make a full reversal.

If spot volume ever does make a return, I believe Bitcoin may have a fighting chance. However based on this data alone I believe BTC has found itself in quite the rut. We are in desperate need of some solid news and volume .

Then again, futures are used to stabilize traditional markets, why should Bitcoin be any different?

I hope you all found this analysis helpful and interesting!
I wish you all the best of luck!
Interesting! I didn't even know there was some futures contracts markets before these two major markets opened.
Interesting case study thank you.
what did I say ;)

Loving the depth house indicator.
My view BTCUSD

Excellent analysis! Aug 11 has been set for SEC announcement regarding SolidX BTC ETF. tbh I wouldn't be surprised by a complete rejection of cryptocurrency by government. BTC is a sitting duck.
oh92 BarclayJames
@BarclayJames, buy the rumor sell the news :D
+1 Reply
Great indicator/ data analysis. Thanks for sharing.

Driving Spot market rise does need solid trading volume, but it is not the same case for future market. Future market can stabilize Spot market, while guide the price movement. There is no ground for the idea that Future market volume absorption cause Spot market volatility loss and price downward movement. The truth is that before the price hits the Real Bottom, potential buyers would not like to take a move. So, the price downward with volume contraction means that we still have a long way to go to reach the bottom.
+1 Reply
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