On the other hand, spot volumes are the number of digital currencies transferred on the on-chain platform. Spot Volume only indicates the successful transfers, not the total transactions.
Furthermore, futures traders buy and sell crypto derivatives, which represent the value of a crypto asset. Futures trading appears more attractive to investors as profits are likely regardless of whether the market direction is bearish or bullish.
Experienced investors used the leverage because they had more capital backing than retail spot traders. Relative to spit trading, futures trading brings in more volume in trades.
How Ethereum’s Spot and Futures Market Performed
The general trend for Ethereum’s spit volume shows that the token has lagged in the futures market for some time. However, the spot market has been prevalent towards the end of last year and into 2022.
Furthermore, from late June onward, the difference between futures and spot trading has been on the rise for Ethereum. Experts believe that the mounting strain on the market and speculations about the upcoming Merge play a role. The Merge will see Ethereum’s existing consensus protocol move to proof-of-stake (PoS) from proof-of-work (PoW) next month.
Analyzing BTC Spots and Futures Markets
A review of Bitcoin’s performance in the two markets shows a different picture than Ethereum. For Bitcoin, the futures volume as of last year holds a significant advantage going into the previous bull run. However, the price of Bitcoin began to peak in the fourth quarter of 2021, culminating in the spot volume taking over the futures price action.
Traders later recover and re-assert their position in June 2022, triggering a resurgence as futures volume overtakes spots.
How BTC and ETH Ratios Compare
Throughout Q1 of 2021, Bitcoin’s future and spot ratio outperformed Ethereum’s. Along the way, a glut followed, which saw both metrics sink and move in correlation. On the other hand, Ethereum’s spot and futures ratio spiked from June 2022 onwards. The surge results from price speculation fueled by the ongoing transition drive.
BTC and ETH Futures to Spot Ratio. Source: Glassnode
Overall, the resurgence in futures volume for both tokens suggests that derivatives investors are active again. Meanwhile, risk asset speculations have returned, and traders are confident of future gains.
Both Bitcoin and Ethereum have their ups and downs in the crypto market. The crypto market, in general, started the year in a downtrend. Prices of major cryptocurrencies have been declining, only to experience a brief surge before fluctuating again.
Despite the bloodbath, networks like Ethereum are gearing up for scaling, a critical part of their platform. Investors, for their part, have shrugged off the negative sentiment to plunge more funds into the market, albeit modestly. The remaining months are crucial for the industry to reverse the dwindling market fortune.