Trading volume on BitMEX, the world’s largest - albeit unregulated - cryptocurrency futures exchange has fallen precipitously since last month, when the market broke through critical support levels, according to data from Bitcoinity.org. More than half of liquidity has left the exchange, from about $600 million worth of volume in October-November, to about $200 today - and at one point in the past few weeks falling below $100 million.
Bitcoin finally broke its key $6,000 support level in mid-November after testing it several times during 2018. This break halved the cryptoasset industry’s total market cap, with it briefly falling below $100 billion.
(Cryptoasset industry market cap; source: Tradingview.com)
Data from Datamish.com show that, between November 13 to 27 - comprising the time bitcoin's support break occurred and eventually settled near $3,700 - long contracts were severely punished: There were $340 million worth of short contract liquidations versus $2 billion worth of long contract liquidations. One may anecdotally speculate that many bulls left the market after high losses.
(On BitMEX, liquidation occurs when the price action moves against the contract’s direction beyond the Maintenance Margin percentage, and the user’s principal funds are taken in order to cover the costs of the contract. It is BitMEX’s equivalent of a Margin Call - only without the call.)
BitMEX in a Seychell
The unregulated Seychelles-registered exchange, which represents 96% of bitcoin futures trading according to CryptoCompare’s November exchange review, is rather infamous in certain sectors of the cryptoasset community for offering very high leverage to inexperienced retail traders, who may use that function irresponsibly. BitMEX’s CEO Arthur Hayes has referred (in jest) to some users of his platform as “degenerate gamblers.”
BitMEX’s trade volume had been rising dramatically over the course of 2018 - from lows near $50 million - possibly as a hedge against falling prices across the cryptoasset market, because short futures contracts allow profit even as prices fall. Most of that activity appears to have been reset now.
The loss in volume on BitMEX may not be so bad for the markets. CryptoGlobe recently reported on research that indicates a potential benefit to more tepid markets with less volume, at least in the case of bitcoin. Less buying and selling could indicate more holders, less selling pressure, and a price bottom to the 2018 bear market.