The 2022 crypto bear market has been the worst on record as most bitcoin traders are under water and continue to sell at losses. In response to the sharp drop in the token price, some investors have fled to save the haven asset; Some have exited the market entirely, while others have turned to the esoteric market of crypto derivatives.
In this regard, Cointelegraph spoke to BingX Brand Lead Emerson Lee. BingX is a Singapore-based social-based cryptocurrency exchange known for its leaderboards where users can compete with others for return on investment, as well as share ideas among their followers. The exchange processed approximately $319 million in trading volume, mainly derivatives, within the last 24 hours. Here’s what Lee had to say about the recent market drop:
BingX users are also increasing; Compared to Q1 2022, the number of users increased by 70% in the second quarter, and the volume of transactions doubled since this period of recession. We believe that its demand for derivatives is still growing as it allows users to profit from falling prices, a feature that other products do not have.
During bear markets, traders can buy derivatives known as put options to hedge their positions or anticipate that the value of the underlying token will fall. While this can only be done by shorting the coin, violent and periodic bear market rallies can lead to theoretically infinite losses on one’s short position. In addition, the lack of liquidity to borrow the coins may cause exchanges to charge high-interest rates on one’s positions. On the other hand, the put buyer’s losses are theoretically limited to the premium they paid for the derivative, and there are no additional interest charges.
Lee further noted that BingX deposits have also seen a sharp increase in the recent past. “As higher market volatility is appropriate for the derivatives market, we see more users participating in such transactions and stimulating greater demand for deposits.”
The money appears to be moving back from the DeFi protocol to CeFi products. “For high-risk products such as DeFi staking, we believe traders have been panicked by the recent market, impacted by the Terra Luna case and problems with many DeFi protocols,” said Lee. Risk appetite of users has decreased, and demand has declined,” Lee said. ,
Indeed, dYdX, a decentralized crypto exchange known for its margin and perpetual contract products, saw its weekly trading volume drop by almost 90% from the $12.5 billion seen from October 24 to October 30 last year. However, trading volume is still several magnitudes higher than a year ago, partly due to the aforementioned risk-hedging tailwind.
Risk-wise, it appears that the worst is over as a spike in liquidations on dYdX, mainly in the Ethereum and Bitcoin markets, ended mid-June. Glassnode experts noted that tokens held in wallet addresses by both new investors and crypto whales were growing significantly amid the sell-off.