Global Bitcoin trading volume reaches record high

Bitcoin trading volumes have reached all-time highs as the digital currency’s price approaches a 52-week peak.

    According to Bitcoinity, November 26 was the busiest day for exchanges, with data sources showing that the total number of bitcoins traded on all exchanges that day was as high as 2.86 million.

     The previous record for trading volume was reached a few weeks ago, when 2.49 million bitcoins were traded on October 30, four weeks ago, when the price of bitcoin peaked.

     As trading volume increased, the price of Bitcoin also rose. According to the CoinDesk Bitcoin Price Index, on November 26, when trading volume reached its peak, the price of Bitcoin also rose by $25, or 7.6%. This phenomenon of increasing trading volume accompanied by rising prices also occurred in late October and early November this year.

Is market acceptance of Bitcoin increasing?

     While the increase in trading volume occurred during the Black Friday shopping holiday, making it more likely that market acceptance of bitcoin is related to the increase in bitcoin prices and trading volume, market observers at CoinDesk believe that the increase was mainly caused by traders and exchanges themselves, rather than commercial activities.

     “Only a small fraction of the volume can be attributed to the mass adoption of bitcoin,” said Alistair Milne, who runs the Monaco-based Altana Digital Currency Fund.

     As exchanges introduce more leveraged trading, a model that allows traders to speculate using loans, the potential for big swings in the price of bitcoin increases. When the borrowed funds mature, they can cause the price to rise or fall, Milne added.

     “Bitcoin traders, especially those using leverage, can artificially intensify both supply and demand in the short term…When leveraged contracts expire or are settled, they can cause large swings in the spot price,” he said.

     BTCC exchange recently introduced leveraged trading. It launched its own professional trading platform, which allows traders to borrow 20 times their principal, which has led to a significant increase in trading volume.

     “Since we launched 20x leverage trading in mid-October, the increase in users and trading volume has been noticeable,” BTCC CEO Bobby Lee said in a statement.

Leveraged Trading

      The dissonance between real-world adoption of Bitcoin and its price can be explained by the volume of transactions on the blockchain, which has risen steadily over the past year, nearly doubling from $53 million a year ago to $95 million today, according to Blockchain.info.

     Meanwhile, Bitcoin is priced around $380 today, roughly the same price level as it was a year ago.

     “[Bitcoin transactions] have doubled in 12 months, and the price hasn’t moved!” Milne said.

     In addition to the increase in trading volume due to leverage, some market observers believe that the automated trading software installed within exchanges also inflates the number of transactions on their platforms. This creates the illusion of a highly liquid market, which may attract more customers.

     Members of the Whale Club, a popular trading space on the messaging tool TeamSpeak, accused exchanges of incorporating fake trades to boost their volumes.

     “Anyone who follows the market will know that exchanges use fake means to increase trading volume. I think the reason why exchanges do this is that they believe that if the exchange can be ranked at the top of the volume table, it will attract more new customers,” Milne said.

     Data from Bitcoinity shows that two Chinese exchanges, OKCoin and Huobi, dominate the trading volume charts, contributing a combined 78% of total trading volume in the past 30 days.

     In comparison, Bobby Lee’s BTCC exchange only accounts for about 5%. Lee believes that the increase in trading volume is mainly due to the increase in demand for Bitcoin from people other than speculators and leveraged trading.

     “The significant increase in Bitcoin trading in China is mainly due to two reasons: one is that more and more people believe that Bitcoin is a beneficial digital asset, and the other is Chinese people’s concerns about domestic financial conditions, including the sluggish Chinese stock market and the increasing influence of the US dollar and global foreign debt relative to the RMB.”