This article seeks to analyze Bitcoin’s perpetual volume contracts, Bitcoin’s correlation to the Nasdaq 100 and Bitcoin holders' profitability.
Trading volume metrics are important for investors to take into consideration when trying to identify momentum and volatility in the market. High volume is most often followed by a significant increase or decrease in an asset's price. As is the case with spot and derivatives markets, volume can act as a sign of trend strength of the price movement.
The indicator below depicts the volume traded of perpetual swaps contracts on the top centralized exchanges. As we have written before, “total volume is calculated by multiplying the total number of contracts traded times the dollar value of each.”
In the derivatives market, perpetual swap contracts (perps) are some of the most-traded instruments. This type of derivative experienced fast adoption after its release by BitMex, ultimately being adopted by most centralized exchanges and passing spot trading in volume traded shortly after. As the derivatives market is more liquid, there is more volume, thus giving more insight into the market sentiment.
During the market volatility on June 13, 2022, perpetual swap contracts traded volume reached $145.47 billion, the highest recorded so far in 2022. We’ve already mentioned how derivatives volumes can signal trends — here, this high volume is in part due to liquidations from volatility. However, it also suggests a high amount of trading activity.
Furthermore, another key metric that caught our attention was Bitcoin’s price performance in correlation with the Nasdaq 100.
Nasdaq 100 is a traditional finance index composed of the 100 largest, most actively traded U.S companies listed on the Nasdaq stock exchange. As depicted on the indicator above, up until the end of May, Bitcoin had carried a significant correlation with the Nasdaq 100 since the beginning of the second quarter of 2022. This high correlation was broken briefly when the traditional finance markets suffered a market sell off. Correlation is currently increasing as crypto markets decrease in price.
With Bitcoin’s decrease in price is also worth having a look at the investment profitability of current holders. IntoTheBlock’s Global In/Out of the Money indicator identifies any address with a balance of tokens, the average price (cost) at which those tokens were purchased and compares its current price. If the current price is greater than average cost, address is “In the Money.” If the current price is less than average cost, address is “Out of the Money.”
Consequently, as Bitcoin price decreased the percentage of addresses, “In the Money” decreased as well, with 46.78% of the token holders currently making a profit. This percentage of addresses “In the Money” represents the long term Bitcoin holders. Out of the 45 million Bitcoin addresses 21 are still profiting on paper.
In addition, another interesting trend noticed in Bitcoin’s indicators is the growth in Large Holders Netflows. This indicator measures the amount of inflows minus outflows pertaining to addresses with over 0.1% of circulating supply.
Large Holders Netflow provides an idea of the change in positions of whales and investors with over 0.1% of supply. As noticed on the graph above, there is a positive netflow of 71.95k BTC which signals accumulation from large players. These are the group of holders that usually represent the true believers in the technology and the ones that will be willing to hold the ups and downs of the token. Since they are in it for the vision of the project, they will take greater risks.
In conclusion, this article gives further insight of the distinct metrics affected by the recent market circumstances. In addition, we analyze Bitcoin’s possible behavior characteristics and what it may be more susceptible to. Constant monitoring of these metrics helps to gain and develop further insight and understanding of the market.