Trading volumes across major centralized cryptocurrency exchanges (CEXes) continued to contract throughout the month of May as regulators cracked the whip in the US and around the world. in a report compilation and production By CCData, records show spot and derivatives trading volume across platforms like Binance and OKX fell 15.7% to $2.41 trillion.
It marked the second month of lower trading volumes when crypto-asset prices moved mostly sideways and generally fluctuated to early 2023 levels.
Trading volumes drop by double digits in May
A notable development is that spot trading volumes fell 21.8% in May to $495 billion.
At this rate, trading volumes have fallen to levels last seen in March 2019. Meanwhile, crypto-derivatives trading volumes fell to a six-month low when they shrank 15.7% to $1.95 trillion in May.
The market share of Binance, the world’s largest cryptocurrency exchange by trading volume, also fell to 43% in May. This development comes after the exchange announced that it would stop trading spot-free-fee USDT pairs.
However, at this level, Binance remains dominant and is relatively more active than competitors such as Coinbase, Kraken, and Bitfinex.
CCData notes that the general decline in Binance’s market share and trading volumes can also be attributed to general weakness in the market and increased scrutiny by regulators, especially in the US.
Market weakness was visible in May as bitcoin prices failed to surpass the $31,000 mark recorded in April. Instead, Bitcoin continued to track lower, dropping to $25,800 sometime in May. Prices are currently struggling under $30,000.
With the US Securities and Exchange Commission (SEC) suing Binance and Coinbase, alleging they offer unregistered securities, trading volumes could continue to drop in June 2023, which could affect liquidity.
Crypto sentiment deteriorating?
Spot trading refers to the natural demand for a particular crypto asset in the cryptocurrency market. Spot buyers usually do not engage in margin trading activities that may be available on the same platform.
When volumes drop rapidly, this indicates a possible shift in demand, indicating that interested buyers may be hesitant due to current market conditions.
Thus, lower trading volumes reflect the cautious sentiment among traders. Thus, this can affect the overall trading activity and, in turn, the liquidity in the market.
On the other hand, cryptocurrency derivatives traders engage in market speculation with the aim of profiting from the volatility of crypto assets. Cryptocurrency platforms such as Bybit, Binance, and OKX make it possible to trade various cryptocurrency derivatives. Here, traders can place positions using leverage.
While spot trading volumes fell the fastest in May, the number of crypto derivatives contracts contracted at a slower pace.
This may indicate that although potential buyers of cryptocurrency have moved away from centralized cryptocurrency exchanges, the relatively high liquidity of centralized cryptocurrency derivatives platforms has allowed some traders to continue to post positions taking advantage of the cryptocurrency’s price rally in May.
Featured image from Canva, chart from TradingView