Cryptocurrency Exchanges: Volume, Open Interest, Market Size, Growth and Trends

January, February 2022

Key Takeaways:

• Trading volumes on spot cryptocurrency exchanges demonstrate a downward trend along with web traffic since November 2021
• Bitcoin volume varied slightly at the beginning of 2022, while trade volume of Ethereum futures showed a downward trend in two months in a row since 2021.
• Aggregated open interest of BTC and ETH futures fluctuated steadily in January-February 2022 compared to the volatility of the same period a year ago
• In January 2022, futures market recorded two large liquidations of more than $500m when the BTC rate tested local minimum values
• The volume of BTC and ETH options in February 2022 slowed down noticeably after remaining steady over 2 months
• Leading cryptocurrencies updated local minimum in prices since July 2021
• Market capitalization as of February 28, 2022 achieved $1.8 trillion, which is 23% lower compared to the end of 2021.
• Fireblocks, FTX and Polygon raised more than $450m in venture funding rounds in 2022

Spot Market

In the first two months of 2022, trading volumes on spot centralized cryptocurrency exchanges hit their lowest level since December 2020. According to The Block Legitimate Index, trading volume on six leading cryptocurrency exchanges in February 2022 continued the January downward trend and reached $647b, which is 36% lower compared to the same values of December 2021. Binance continues to dominate on the CEX market with trading volume of $424b based on February monthly results.

Graph 1. Crypto-only Exchange Volume [10]
Note: Spot market share of cryptocurrency exchanges with primarily only crypto support

Trading volume spot on cryptocurrency exchanges is correlated with web traffic (including both spot and derivative trading), which declined by 20.6% in February versus the previous month and achieved 339.4m of total visits, according to The Block referring to SimilarWeb. Monthly traffic has been decreasing since November 2021, when the total number of visits was 546.6 million.

Graph 2. Cryptocurrency Exchange Traffic [8]

Futures Market

1) Futures Volume

Total trading volume of bitcoin futures on cryptocurrency exchanges varied modestly at the beginning of 2022, going up to $1.5 trillion in January and going down to $1.4 trillion in February 2022.

Futures contracts on Ethereum demonstrate a decline in activity for 2 months in 2022 in a row, where February value was equal to $0.74 trillion, the lowest value since the summer of 2021.

Graphs 3-4. Volume of Bitcoin Futures and Volume of Ethereum Futures [10]

2) Aggregated Open Interest

Aggregated open interest (OI) of BTC and ETH grew repeatedly in September-November 2021 when the prices of BTC and ETH recorded historical highs. At the beginning of December 2021 and at the end of January 2022 when Bitcoin lost more than 10% of its value, a lot of long positions got instantly liquidated, mainly on BitMEX exchange, hence decreasing the open interest as well. In general, prices of underlying assets tend to correlate to its open interest.

In 2022, aggregated open interest of BTC and ETH futures fluctuates steadily compared to the volatility of the same period a year ago. The key figures of aggregated open interest are presented in the table below.

Aggregated Open Interest on BTC and ETH futures, January-February 2022 [10]

Graphs 5-6. Open Interest on BTC Futures and Open Interest on ETH Futures [10]

According to the BTC Long/Short ratio on Binance, the futures market is consistently dominated by long positions over short positions. The prevalence of short over long positions in 2022 was observed at the beginning of March.

Graph 7. BTC Long/Short Ratio on Binance [10]

3) Liquidations

The first large liquidation in 2022 of more than $500m was recorded on January 5, when BTC rate tested a local minimum near $43k. However, the higher record was established on January 21, when bitcoin rate fell below $36k, and the total volume of liquidations reached $1b.

Graph 8. Liquidations [5]

Options Market

The volume of BTC and ETH options in January 2022 remained steady in dollar equivalent versus December 2022. However, the volumes in February 2022 declined sharply to $17.1b and $12.1b for BTC and ETH correspondingly. Deribit, a derivative trading platform, holds its leading position in the crypto options marketplace.

Graphs 9-10. Volume of BTC options and Volume of ETH options [10]

Dynamics of Leading Assets

The price correction that started at the end of last year continued in January 2022.
Leading cryptocurrencies (BTC, ETH) have updated local minimums in prices since July 2021. At the moment, BTC hit its lowest point of $32,917 on January 24, 2022, and ETH significantly dropped to $2,159. In February 2022, the price of Bitcoin and Ethereum experienced 3 local peaks, the highest prices were $44,574 and $3,241.

Graphs 11-12. BTC price and ETH price [2]

Demand for all crypto assets had skyrocketed in 2021. Crypto-asset manager Grayscale Investments investigated that a majority of investors had been involved with the asset class during 2021.

Along with Bitcoin and Ethereum some smaller coins and tokens, influenced by social-media sentiment, have posted even larger drops. An index tracking the largest 100 cryptocurrencies is down 26% year-to-date.

Glassnode analysts pointed the risks of ongoing fall in the price of bitcoin: “Short-Term Holders currently (as of the end of February 2022) own 54.5% of all coins held at an unrealized loss (2.56M $BTC), creating sell-side headwinds for price”. The analysts mentioned that the price needs to approach the range of $42k – $50k to reduce the risks of downtrend continuation.

Graph 13. Bitcoin: Long- and Short-Term Holder ORPD [2]

The total capitalization of the cryptocurrency market as of February 28, 2022 is $1.79 trillion, which is 23% lower compared to the end of 2021.

Total Market Capitalization [2]

Venture Rounds

 

References:

1. “Bitcoin Faces Sell-Side Headwinds”. Glassnode, February 21, 2022
2. “Cryptocurrency Prices”. CoinGecko. March 15, 2022
3. “FTX Trading Ltd. Closes $400M Series C Round”. PR Newswire, January 31, 2022
4. “FTX US Closes $400M Series A Round”. PR Newswire, January 26, 2022
5. “Futures Markets Global Charts”. Coinalyze, March 15, 2022
6. Hajric, V., Gardner, A. Crypto Trading Volume Slows, Boding Ill for Exchanges. Bloomberg, February 3, 2022
7. Khatri, Y. Fireblocks raises $550 million in Series E funding, now valued at $8 billion. The Block, January 27, 2022.
8. Moura, C. “Monthly web traffic to crypto exchanges fell by 20% in February”. The Block, March 9, 2022
9. “Polygon Raises $450,000,000 From Sequoia Capital India, SoftBank, Galaxy, Tiger, Republic Capital”. Polygon, February 7, 2022
10. The Block, 16 March, 2021