The Great Crypto Collapse of 2022
2022 has not been the year for crypto enthusiasts. The cryptocurrency bear market has left many Bitcoin traders gasping for air, with most swimming in a sea of red. As values plummeted, some investors made a mad dash for safe-haven assets while others simply packed their bags and exited stage left. And then there are those who, in a curious twist of fate, turned their attention to the obscure world of crypto derivatives.
Investors Seeking Shelter in Derivatives
In the midst of this market chaos, we had the pleasure of chatting with Emerson Li, the brand lead at BingX, a social-based cryptocurrency exchange based in Singapore. BingX isn’t your average exchange; it’s a playground for investors to compare performance and share insights. But they’ve been a bustling hub lately, processing approximately $319 million in trading volume over just 24 hours. This volume largely stems from derivatives, which have piqued the interest of investors trying to navigate the turbulence.
The Appeal of Derivatives
Why the sudden interest? Emerson suggests that amid the downturn, the allure of derivatives—particularly put options—has caught on like wildfire. Traders can hedge against their sinking ships or wager on further declines without the agonizing risks of shorting. Remember, shorting can be a slippery slope, especially during those unpredictable bear market rallies that could lead to massive losses! With put options, however, the worst-case scenario is limited to what you pay for the contract, plus no sneaky interest fees to boot.
BingX’s Surging Popularity
With high demand comes growth! Li reports a staggering 70% increase in users from Q1 to Q2 of 2022. Simultaneously, transaction volumes have doubled during this turbulent period. BingX’s user-friendly nature and focus on derivatives appear to be striking a chord with traders who see potential profits, even amidst falling prices.
From DeFi to CeFi: A Shift in Strategy
Interestingly, as the crypto market fluctuates, funds seem to be returning from DeFi protocols to CeFi products. Traders are tightening their belts, seemingly haunted by recent scandals (who could forget the Terra debacle?). According to Li, this trend indicates a declining risk appetite. dYdX, a decentralized exchange known for its offerings in margin and perpetual contracts, witnessed an almost 90% drop in weekly trading volume. But fear not, the volumes are still higher than last year, thanks to the ongoing need for risk-hedging tactics.
A Ray of Hope?
As we move forward, it seems there’s a glimmer of hope—or at least, a sense of calm. Experts at Glassnode noted that the number of tokens held by both casual investors and crypto whales has increased significantly, suggesting that some are bullish on long-term prospects. Moreover, the spike in liquidations on dYdX for Ethereum and Bitcoin seems to have calmed down since mid-June, suggesting that the worst might just be over.
