The crypto markets have experienced explosive growth since Bitcoin’s inception in 2009, and this is emblematic by the massive climb in the aggregated market’s 24-hour trading volume – which has surged from roughly $10 million in 2014 to hitting over $100 billion in late-October.
Data suggests that this massive increase in trading volume in spite of any massive growth in the crypto markets price-wise may stem primarily from the growing popularity of margin platforms that allow users to utilize leverage in order to trade large positions.
Over the past several years, active traders have been pouring into the crypto markets, lured by the extreme bouts of volatility that the nascent markets experience on a frequent basis.
Although this volatility may scare off passive investors who are fearful of watching their portfolios’ value vary significantly on an hourly basis, it is an ideal environment for active traders who are looking to capitalize on the large price swings seen by Bitcoin and other cryptocurrencies.
And now, the era of margin trading has made the crypto markets all the more favorable to traders who can utilize leverage to trade with a significantly larger amount of capital than they would otherwise be able to, which can make price swings in both directions significantly more lucrative for traders.
Our research team at PrimeXBT anticipates Bitcoin to continue seeing explosive trading volume growth as more traders begin utilizing leverage in order to increase their profitability.
This massive growth that we foresee coming in the near-future will simply mark an extension of the growth that has already been incurred over the past year, which is elucidated while looking towards the nearly $400 million in daily trading volume that we have incurred across the wide array of assets that our platform supports in less than a year after launching.
Furthermore, this notion is also supported by the fact that Bitcoin futures contracts on just a handful of popular platforms currently accounts for 50% of spot trading volume, according to a recent report from Bloomberg.
Because leveraged trading allows both large and small investors to trade with significantly larger amounts than they would otherwise be able to, it significantly inflates the market’s trading volume and may even help provide long-term stability to the crypto markets, similar to the effect that futures trading had on traditional markets.
Bloomberg notes in the same report referenced above that the rise of margin and futures trading may have a stabilizing impact on the volatile asset in the long-term, explaining that it is currently estimated that only 5% of the crypto market’s $200 billion market capitalization is real money invested, while the other 95% is paper profits.
“At the moment, the $200 billion market capitalization of crypto probably represents only about $10 billion of real money invested—the rest is paper profits. This is one source of instability that makes crypto prices volatile,” Bloomberg explains, going on to say that as open interest in Bitcoin positions increases, the markets may see a “steadily increasing source of real money to stabilize prices.”
As Bitcoin and the aggregated crypto markets continue to experience massive growth, it is highly probable that a large portion of this growth will be fueled by traders turning to margin trading platforms in an effort to increase their profitability.
When choosing which margin platform to use, traders ought to look towards a couple key factors, including the diversity of the assets supported by the platform, as well as the amount of leverage available on these assets.
PrimeXBT is a great example of a prominent and rapidly growing margin platform that offers users the option to trade assets spanning across multiple markets, offering up to 1000x leverage on some of these assets while also offering a cleaner and more intuitive interface than many of its competitors.
We also take the privacy and security of our users and their assets very seriously, providing cutting-edge security features while also enabling users to create a fully anonymous account without having to surrender any private information.
Platforms like ours will undoubtedly play an integral role in ushering in a new era of growth and maturation for the markets surrounding Bitcoin, and we anticipate the coming few years to see unprecedented development due to the rapidly growing popularity of margin and futures trading.
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