By
Temitope Olatunji
April 19th, 2024
COVID-19 has become a serious challenge for the world economy. The economists predict that the worst is yet to come. However, cryptocurrency exchanges noted some massive spikes in their Bitcoin trading volumes.
The world is currently facing one of the most serious challenges in the last decades: the spread of a deadly virus. The novel coronavirus (COVID19) continues with full force and it has already engulfed a number of countries outside of China.
Italy, Iran, South Korea, Germany, Spain, Belgium, and other European countries are feeling the impact heavily while cases in the United States continue to spiral out of control. This appeared to have given sellers a good enough reason and traditional financial and stock markets tumbled. Wall Street’s major indices marked their quickest 30% drop in history. The Dow Jones Industrial Average (DJI), recorded losses that haven’t been seen since 1987.
The cryptocurrency market wasn’t left out. As people were eager to get their money on cash as quickly as possible, the fairly liquid crypto market felt the pain. In just over a day, it lost almost half of its entire capitalization as Bitcoin plunged down to $3,600. However, cryptocurrency exchanges noted some massive spikes in their Bitcoin trading volumes. Given that there are many Bitcoin leverage exchanges out there, trading got particularly intense.
Bitcoin Trading Volume Spikes to ATH
In the world of trading, volatility is always good for volumes, regardless of the direction of which the prices are going. In this case, unfortunately, cryptocurrencies were declining at an unprecedented rate. Exchanges, nevertheless, saw some hefty increases in their overall Bitcoin trading volume.
Data from CoinMarketCap reveals that the total trading volume on March 13th increased to as much $275 billion across cryptocurrencies and exchanges.
Going forward, Bitcoin’s total trading volume on that day spiked to a record-breaking $75 billion. Just for a quick comparison, back in 2017, when Bitcoin reached its all-time high dollar-value of $20,000, the trading volume across the board was around $15 billion – about five times less than now.
Why Is Bitcoin Trading Volume Surging?
One of the most compelling reasons for the surge in Bitcoin’s trading volume is perhaps the fact that there are, indeed, a lot of margin trading exchanges. People are now able to leverage extremely high positions without putting up the high capital they needed back in 2017. Back then, there weren’t a lot of margin trading exchanges.
For instance, Binance, which is the world’s leading cryptocurrency exchange, launched its futures platform last year and it quickly became one of the market’s leaders. In fact, the Bitcoin trading volume on the futures exchange now regularly exceeds that of the spot exchange, signaling the massive interest in this type of trading product.
It’s Not All Butterflies
Naturally, the increased trading volume brings higher revenues for cryptocurrency exchanges in the form of trading fees.
However, in this particular case, it wasn’t entirely peaches and butterflies for the venues because the price was declining very rapidly.
The VP of Binance Futures, Aaron Gong, spoke on the matter. He outlined that on March 12th when Bitcoin’s price dipped to $3,600, losing 50% in a violent swing, the exchange’s Insurance Fund lost “more than 50% of its value as its USDT reserves fell from 12.8 million to 6.2 million USDT”. In turn, Binance injected an additional 5 million USDT in order to protect its users from the auto-deleverage liquidations.
In any case, the crisis is likely to be ahead of us. With the U.S. Government pumping trillions of dollars in emergency money into the economy, this will possibly cause a lot of strain on the purchasing power of the US Dollar. While the measures are seemingly working, for now, a lot of experts, including renowned economist Peter Schiff, worry that the worst is yet to come and that this financial crisis will be even more fierce than the one back in 2008.