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Binance’s market report for March


Earlier today, Binance released a report on Binance futures trading in March to explain some developments in the cryptocurrency market. However, what stands out is the liquidity crisis that dragged down the cryptocurrency markets.

Binance’s report highlights a widespread sell-off in mid-March sparking a record number of liquidations, and with it Bitcoin experienced one of the most volatile conditions in recent memory.

Additionally, they underline that commercial activity in the spot and futures markets increased. From this we can infer that investors have invested more money to accumulate cryptocurrencies at gift prices.

Among other things, the Binance report also takes into account the Relative Strength Index. According to the IFR, prices have sunk into extremely oversold territory, with this being its lowest value since November 2018.

March will remain in investors’ memory according to Binance report

With losses of 20% in value in most cryptocurrencies, March will be memorable as a black month for many. All this was the result of the economic impact of COVID-19. We are talking about a global liquidity crisis.

Bitcoin was particularly hit, suffering a 40% drop as liquidity evaporated. The rapid drop in prices triggered a tsunami of liquidations, creating a feedback loop that caused prices to drop further.

Graph 1 - Bitcoin's Daily Historical Returns. Source: Binance Futures
Graph 1 – Bitcoin’s Daily Historical Returns. Source: Binance Futures

Evidently, the collapse of March 12 was one of Bitcoin’s worst trading days in recent years. Bitcoin’s continuous 30-day volatility peaked at 1 year in March, surpassing volatility levels last seen in July 2019.

Graph 2 - Historical volatility in macro assets. Source: Skew
Graph 2 – Historical volatility in macro assets. Source: Skew

As shown in the Binance report, BTC volatility levels increased dramatically from March 13, surpassing its peak in July 2019. They then held above 150% throughout March. In comparison, Bitcoin experienced higher volatility than traditional assets like Gold (XAU) and the US stock market. USA (SPX).

“Where there is volatility, there is profit”

Despite what happened after the Bitcoin sell-off, many cryptocurrency exchanges reported a record month in volume. The reason is that for many volatility offers ample opportunities for profit.

Another effect of BTC’s fall in March is that it fueled all-time high volumes in the spot and derivatives markets. The data indicates that investors have invested more money in the spot markets, taking advantage of the opportunity to accumulate crypto assets at bargain prices.

Binance Discusses Bitcoin’s Price Path Since March

Since the end of March, Bitcoin’s price has steadily increased after its price was backed at the $ 6,000 mark. Consequently, the BTC – USDT ratio rebounded back to 3.99.

However, ETH – USDT and BCH – USDT did not experience a similar recovery as the proportions remain low for the rest of the month. According to the exchange, the increase in spot purchase volume essentially led to a change in the market, allowing Bitcoin to recover without severe setbacks and with relatively low volatility.

Binance’s report also highlighted that perpetual futures prices varied widely across different crypto exchanges due to extreme volatility during this period.

As such, it presented an opportunity for traders to arbitrate between exchanges. For example, a trader could open a long position in the future that offers the highest premium and simultaneously open a short position in the future with the lowest premium.

Long position liquidations

Another interesting fact is that 90% of the settlements were long positions, but many investors maintained positions leveraged by the bullish expectation after Bitcoin’s Halving.

Binance Futures saw over 50% of its open positions closed, which coincides with the decline in open interest. In the days following the settlement, open interest and the total number of positions recovered to previous levels as traders opened new positions to capitalize on market volatility.

Why are investors staying in the market despite the recent collapse? Binance tells us

The massive sale in March presented numerous opportunities for long-term investors to accumulate Bitcoin and other major cryptocurrencies at reduced prices.

Long-term investors often express their belief and confidence that Bitcoin can revolutionize the financial system in the future. Therefore, the potential to generate significant long-term returns.

Long-term holders believe in their technology and are immune to price volatility. As such, investors could continue to accumulate undervalued Bitcoins in the meantime because it is still seen as a hedge against the current global macro environment.

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