With the bear market in full throttle, crypto derivatives retain their popularity


The bear market of 2022 cryptocurrency was the worst recorded as most Bitcoin traders are underwater and continue to sell at a loss. In response to the rapid decline in token prices, some investors fled to save port assets; some have left the market completely, while others have perplexedly turned to the enigmatic market of crypto derivatives.

In this regard, Cointelegraph spoke with BingX brand leader Emerson Li. BingX is a Singapore 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 has processed about $ 319 million in trading volume in the past 24 hours, mainly consisting of derivatives. Regarding the recent market downturn, here is what He had to say:

BingX users are also multiplying; compared to Q1 2022, the number of Users increased by 70% in the second quarter, and transaction volumes have doubled since this round of decline. We believe its demand for derivatives continues to increase as it allows users to take advantage of falling prices, a feature that other products do not have.

During bear markets, traders can buy derivatives known as put options to either hedge their positions or speculate that the value of underlying tokens will fall. While this can be done by simply shortening the currency, violent and periodic bear market rallies can lead to theoretically endless losses on their short position. In addition, a lack of liquidity to borrow currencies in the short term can lead to exchanges charging high interest rates on their positions. On the other hand, the well buyer’s losses are theoretically limited to the premium they paid for the derivative, and there are no additional interest rates.

He went on to explain that BingX has also seen a sharp increase in deposits recently. “As high market volatility is appropriate for the derivatives market, we are seeing more users participate in such transactions and stimulate more demand for deposits.”

Money also seems to flow back to CeFi products from DeFi protocols. “For high-risk products such as DeFi-staking, we believe retailers have panicked under the recent market, affected by the Terra Luna issue and the problems with many DeFi protocols. Users’ risk appetite has decreased, and demand has decreased,” he said. Li. .

Indeed, dYdX, a decentralized crypto exchange known for its margin and perpetual contract products, has seen its weekly trading volume fall by about 90% of the $ 12.5 billion certified from October 24 to October 30 last year. However, the trading volume is still several magnitudes higher than a year ago, in part due to the aforementioned risk-covering backwind.

Risk-wise, it would seem that the worst is over because a spike in liquidations on dYdX, mainly in the Ethereum and Bitcoin markets, has dissipated since mid-June. Glassnode experts noted that tokens held in wallet addresses by both new investors and crypto whales were significantly increasing in the middle of the sale.