Futures hold steady while spot Bitcoin trading volume tumbles
Bitcoin saw a drop in trading volume across both the spot and futures markets over the past five days. The decline, which followed a sharp drop in Bitcoins price after a week of extreme volatility, was likely driven by a combination of disappointing political developments, macroeconomic tensions, and weekend trading patterns.
Data from Checkonchain shows a stark contrast in the magnitude of the volume declines between spot and futures markets. Spot trading volume, representing the direct buying and selling of Bitcoin on centralized exchanges, fell from $12.07 billion on March 6 to $8.93 billion on March 10, a decline of just over 26%.
In contrast, futures trading volume dropped from $110.95 billion to $103.48 billiona decrease of 6.73%. The spot markets decline outpaced the derivatives market by 19.28 percentage points, showing greater sensitivity to market conditions.
This disparity shows the structural differences between the two markets. Spot trading is usually driven by retail investors seeking direct exposure, which is why the spot market reacts quickly and more aggressively to shifts in sentiment.
Meanwhile, Futures trading, involving leveraged positions and hedging, tends to maintain activity even during uncertainty, as traders adjust their positions to speculate on price movements regardless of direction. Between March 6 and March 10, the derivatives market showed much more resilience, while spot volumes bore the brunt of the downturn.
The weekend of March 8 was pivotal in driving the overall volume decline, with both markets seeing significant drops. Unlike traditional financial markets, crypto markets operate continuously, but weekends consistently exhibit lower trading activity due to multiple factors. Institutional traders, who account for a growing share of crypto volume, often scale back operations outside regular business hours, particularly over weekends when traditional markets are closed.
One of the largest derivatives exchanges, CME, operates during regular business hours, which means the large percentage of futures volume it accounts for during the weekday drops. Retail traders, too, tend to reduce activity due to personal schedules or a perception that major market-moving events are less likely to occur.
Additionally, the absence of overlapping trading sessions with equity and forex markets limits arbitrage opportunities, further dampening volumes. This natural weekend slowdown creates a baseline of reduced liquidity, making the market more susceptible to external shocks.
In this case, the usual weekend lull was amplified by specific events. On March 8, President Trump unveiled his much-anticipated strategic Bitcoin reserve plan. Many investors had anticipated a bold move such as large-scale Bitcoin purchases by the U.S. government to signal institutional adoption and drive prices higher.
Instead, the plan utilized seized Bitcoin and a budget-neutral acquisition strategy, offering no fresh demand. While many Bitcoin advocates celebrated the plan, some of the market seemed disappointed.
This disappointment triggered a cautious response, with traders adopting a wait-and-see approach rather than engaging actively. Concurrently, escalating US-China trade tensions added pressure. New tariffs on Chinese goods heightened fears of economic fallout, fostering a risk-off sentiment that spilled into the crypto market.
The markets reaction was swift and clearly visible in price action. On March 9, Bitcoins price fell from $86,170 to $80,640, a 6.4% drop in 24 hours. This volatility likely deterred trading further as participants hesitated amid uncertainty.
Interestingly, derivatives volumes briefly spiked on March 8, rising from $110.78 billion on March 7 to $115.68 billion, suggesting some traders used futures to hedge or capitalize on the anticipated drop. However, by March 9, derivatives volumes fell to $106.66 billion, aligning with the broader trend of reduced activity.
Total sell volume also declined, from $6.10 billion on March 6 to $4.47 billion on March 10, a drop of 26.72%. This indicates the price decline was not fueled by aggressive selling but by a lack of buying interest. With traders stepping back, the absence of demand allowed prices to slide, even with relatively low sell pressure.
The crypto markets sensitivity to news remains pronounced, as seen in the rapid response to Trumps announcement and the trade tensions. This shows how different it is from traditional markets, where responses are often more measured.
The sharp drop in spot volumes also exposed liquidity risks. With trading activity thinning, price movements became exaggerated evident in the 6.4% plunge on March 9 posing challenges for market stability. Meanwhile, the smaller decline in derivatives volumes suggests traders relied on futures to navigate uncertainty, reflecting a growing sophistication in risk management.
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