The 2022 cryptocurrency bear market continues to be the worst on record since many Bitcoin traders are underwater and then sell baffled. As a result of the rapid decline of token prices, some investors have fled to safe-haven assets some have exited the marketplace completely yet others have perplexingly switched towards the enigmatic market of crypto derivatives.
In relation to this, Cointelegraph spoke to BingX’s brand lead Emerson Li. BingX is really a Singaporean social-based cryptocurrency exchange noted for its leaderboards where users can contend with others for returns on investments in addition to share ideas among their supporters. The exchange processed around $319 million in buying and selling volume in the past 24 hrs, mainly composed of derivates. Concerning the recent market downturn, this is what Li needed to say:
“BingX’s users will also be proliferating in contrast to Q1 2022, Users number elevated by 70% within the second quarter, and transaction volumes doubling because this round of slumps. We feel that it is interest in derivatives continues to be growing since it enables users to learn from falling prices, an element that other products don’t have.”
During bear markets, traders can buy derivatives referred to as put options either to hedge their positions or speculate that the need for underlying tokens will fall. While you can do this simply by shorting the gold coin, violent and periodic bear market rallies can result in theoretically infinite losses on a person’s short position. Additionally, too little liquidity for borrowing coins to short can lead to exchanges charging high-rates of interest on a person’s positions. However, the put buyer’s losses are theoretically restricted to the premium they compensated for that derivative, and you will find no additional interest charges.
Li continued to describe that BingX can also be visiting a sharp rise in deposits as recently. “Since high market volatility is appropriate for that derivatives market, we have seen more users taking part in such transactions which stimulates more interest in deposits.”
Money also seems to become flowing to CeFi products from DeFi protocols. “For top-risk products for example DeFi staking, we feel traders have panicked underneath the recent market, impacted by the Terra (LUNA) — since renamed Terra Classic (LUNC) — affair and also the issues with many DeFi protocols. Users’ risk appetite has decreased, and demand from customers has declined,” stated Li.
Indeed, dYdX, a decentralized crypto exchange noted for its margin and perpetual contract products, saw its weekly buying and selling volume fall roughly 90% in the $12.5 billion observed from March 24 to March 30 this past year. However, the buying and selling volume continues to be several magnitudes greater than a single last year, partially because of the aforementioned risk-hedging tailwind.
Risk-wise, it appears that the worst has ended like a spike in liquidations on dYdX, mainly within the Ethereum and Bitcoin markets, has dissipated since mid-June. Experts from Glassnode noted tokens locked in wallet addresses by new investors and crypto whales have been growing meaningfully among the sell-off.
