Yesterday, CME bitcoin futures trading volume hit a record high in the last month.
More than 32,000 contracts were traded, compared to less than 10,000 the previous day. In the last three days, the previous high was on 22 April, when it was only just over $16,500.
So the financial markets were very active on bitcoin yesterday.
After all, in just one hour, the price fell from $39,000 to $30,000, and then rose very quickly to $37,000, to reach $40,000 in about two hours.
There have been similar shocks in the past, but never so fast, both in terms of the drop and the recovery.
The impact of the flash crash on Bitcoin futures trading
The hypothesis is that this flash crash contributed to a change in the composition of the bitcoin market, and in particular its holders.
The BTC changed hands yesterday are many, and it is possible that the dominant profile of those who sold was markedly different to those who bought.
Yesterday’s selling was mostly due to genuine panic, whereas those who bought at prices that dropped so low so quickly were surely not under the influence of fear at the time.
This can be clearly seen in the crypto markets’ fear and greed index, which fell to 11 (extreme fear) yesterday, after many months of being around 90. It has not been this low since April of last year, while only eight days ago it was still at 68.
In other words, yesterday the crypto markets generated large trading volumes, probably due on the one hand to particular types of investors who sold in a panic, perhaps to close stop losses, while on the other hand stronger hands took advantage to accumulate, with in the end a large transfer of funds from the first type to the second.
In some ways, yesterday may have been a turning point after a period of real decline that took the price of bitcoin from its mid-April high of almost $65,000 to yesterday’s $40,000, excluding the flash crash.
It should also be noted that, according to CoinGecko’s data, BTC’s dominance went from 37.76% to 42.29% in a single day, recovering ten days of declines in this metric in just 24 hours.