Crypto Spot Derivatives Trading Hits All-Time High in March

Crypto spot derivatives saw an all-time high trading volume in March. According to Bloomberg, spot trade volume increased 108% to $2.94 trillion, the largest monthly amount since May 2021, outpacing the gains in derivatives.

Crypto Spot Derivatives See Higher Trading

According to CCData, although Bitcoin set a record in March, the total volume of cryptocurrency spot and derivatives trading on centralized exchanges nearly doubled to its highest level of $9.1 trillion.

According to CCData’s March Exchange review report, spot trade volume increased 108% to $2.94 trillion, the largest monthly amount since May 2021, outpacing the gains in derivatives. The trade volume on Binance, the biggest crypto exchange in the world, surged to levels not seen since May 2021. Derivatives showed an increase of 89.7% to $2.91 trillion, while Spot saw a 121% increase to $1.12 trillion.

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Non-US Markets See Highest Trading Volume for Centralized Derivatives

EY states that there are two types of derivatives markets for crypto: centralized and decentralized. Non-US markets have the highest trading volume for centralized derivatives, whereas CME dominates the US market with over 60% of monthly derivative trading volume as of September 2023.

Despite being smaller, the decentralized derivatives market is growing in popularity because of its security and transparency. A significant participant in DeFi derivatives is the dYdX protocol.

Crypto Spot Derivatives Market Risk

Market risk, counterparty credit risk, liquidity risk, operational risk, legal risk, and compliance risk are just a few of the significant risk types that are present throughout the trading of cryptocurrency derivatives lifecycle. These risk types make it important to use complex risk models and calculations, such as value at risk (VaR) and funding valuation adjustment (FVA).

All of these hazards highlight how important it is to have strong controls and an all-encompassing risk management strategy when dealing with cryptocurrency derivatives. The underlying crypto assets’ high volatility, continuous trading, enforceability under law, management of crypto collateral, regulatory concerns, and market concentration present special challenges for crypto derivatives risk modeling.

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