Binance Futures Volume Reaches Record $2.1 Trillion

Binance’s cryptocurrency derivatives platform, which revolves around futures contracts, continues to surge in popularity, especially thanks to an increased interest from retail traders. Many cryptocurrencies continue their bull run while Bitcoin is on hold. Despite Bitcoin’s underperformance, Binance’s futures trading platform saw record activity last month, processing $2.14 trillion in volume, up 54% from March, according to the latest Binance futures trading report for April 2021, last updated on May 11.

On April 23, the futures platform saw a new record high in 24-hour volume, with $121 billion worth of futures and perpetual contracts being processed during that day.

A Binance representative explained to crypto news media CryptoPotato that the growth can be attributed to several factors, including the overall performance of the crypto space. While the interest from new waves of institutional adopters might have driven the ongoing bullishness of the crypto market, Binance Futures is surging thanks to more active retail traders as well. The representative said:

Since the beginning of the year, we have registered strong increases in both new and existing user activity at Binance Futures. The current upswing in market prices will result in higher demand for more liquidity and hedging tools such as futures and options, and we are well-placed to continue serving our users.”

Binance Futures Open Interest at Record High

Besides trading volumes, another important metric for assessing the performance of a futures trading platform is open interest. Binance futures open interest updated the all-time high on April 16, at $13.4 billion. This coincided with Bitcoin updating its record high at over $64,500. The open interest figure is over 4,000% higher than in the same period of last year.

Daily Volume vs Daily Open Interest for Binance Futures Volume
Daily Volume vs Daily Open Interest for Binance Futures Volume

The increase in open interest reflects the value of futures contracts traded but not settled with offsetting positions. If the gauge edges up, it means that the inflow of money into the crypto market is increasing. Binance offers so-called perpetual contracts for the majority of coins supported by the derivatives platform, and traders can exit the positions at any time.

Nevertheless, as Bitcoin tumbled below $48,000, many traders had no choice but to unwind their leveraged long positions on BTC due to liquidation pressure. Thus, open interest dropped to less than $10 billion up until the end of April. On May 10, the measurement topped $13 billion and is now on track to update the record high again soon, which coincides with another bullish attempt by Bitcoin and the crypto market in general, with Ethereum being the main driver at the moment.

Binance Futures Volume from Feb to May 2021
Binance Futures Volume from Feb to May 2021 – CoinGecko

Speaking about Bitcoin futures alone, open interest in the contracts related to the oldest cryptocurrency saw similar trends on all derivatives exchanges. Thus, Binance’s futures contracts performed similarly to competitors. In mid-April, when open interest on Bitcoin futures on all derivatives exchanges topped $27 billion, Binance’s reading topped $5 billion, reflecting a share of less than 20%.

Aggregated Open Interest of Bitcoin Futures – Binance Futures Volume vs Bybit

According to Binance’s latest update, Bitcoin’s open interest dominance on Binance, which measures Bitcoin Futures open interest as a percentage of total open interest on the platform, edged lower throughout the entire month of April. The BTC open interest dominance figure dropped from 43.7% to 36.3% on April 17 and then recovered slightly to 37.6% by the end of the month. 

Bitcoin Open Interest Dominance based on Binance Futures Volume
Bitcoin Open Interest Dominance

Elsewhere, altcoin futures contracts have been the major contributors of the open interest surge in April, with coins like Ethereum (ETH) and Binance Coin (BNB) being in the spotlight. The impressive growth in altcoins attracted more investors. For example, Ethereum Futures have experienced an uptick in volume and open interest to record levels as well.

In fact, the notional value of open interest in Ethereum futures (open interest expressed in dollar terms) is at a record high at the time of writing as of May 12.

Ethereum Futures Open Interest
Ethereum Futures Open Interest – Binance Funding History

Binance’s report mentioned that Ethereum indeed had an impressive month in April and is currently enjoying similar bullish support in May. While Bitcoin did update the ATH in mid-April, the largest cryptocurrency by market cap dropped considerably shortly after that and eventually closed the month with a small loss compared to March.

Meanwhile, Ethereum rose 44% over the month. More importantly, the second-largest cryptocurrency was up 300% from the beginning of the year to April 30. Ethereum continues to surge, adding about 30% during the last seven days alone as of May 12.

Ethereum’s price surge has to do with the huge demand for the network and the increasing number of tokens locked in smart contracts. Ethereum is still the platform to go for decentralized finance (DeFi) applications and non-fungible tokens (NFTs) – two of the fastest-growing trends within the crypto space. Ethereum supply on exchanges keeps falling, while demand for the token is quite high.

Ethereum Balance on All Exchanges
Ethereum Balance on All Exchanges – Glassnode

According to Binance, investors are also bullish on ETH due to the expected EIP-1559 network upgrade, which is about to address the high gas fees.

When the upgrade is complete, the network will ‘burn’ a portion of the ETH mining fees to help reduce the cost of operating smart contracts on Ethereum. As a result, the total supply of ETH will be reduced, which some analysts believe will result in ETH demand exceeding supply,” Binance explained.

When it comes to Binance’s proprietary token, BNB, it performed even better, doubling in price in April alone. Binance Coin has been by far one of the best performers year-to-date with an impressive gain of over 1,500%. The incredible rally has pushed the token to become the third-largest cryptocurrency by market cap.

Part of the reason why the BNB price surged has to do with Ethereum’s high gas fees. To be more precise, many DeFi and NFT projects were forced to consider Ethereum alternatives because of the high Ethereum fees, and Binance Smart Chain (BSC) has been one of the leading choices. The surge in demand for BSC has led to an increase in the price of BNB, which fuels the Binance Smart Chain ecosystem.

Both Institutions and Retail Investors Become More Active

Binance notes that the cryptocurrency’s bull run has been driven by greater adoption from institutional investors. For example, PayPal recently launched the “checkout with crypto” feature, which will expand crypto payments in the US and eventually worldwide. As of today, US-based PayPal clients with crypto holdings can pay with their preferred coin or token, whether it’s Bitcoin, Ethereum, Litecoin, or Bitcoin Cash.

Elsewhere, several traditional banks and asset managers have revealed their plans to jump into the crypto bandwagon or expand their existing crypto investment services. Thus, Goldman Sachs is reportedly said to be providing Bitcoin and other cryptocurrency-related investment vehicles to clients of its private wealth management group.

Binance concluded:

While we can’t forecast whether the current bull-run will persist through 2022, we can confidently say that positive developments achieved this year by the entire cryptocurrency economy will not wane away anytime soon. Large institutional investors are beginning to see value in the digital asset space. They will continue to invest in transforming our industry to new heights.”

Nevertheless, institutions are not the only players interested in cryptocurrencies. Regular traders like you and me have also become more active during the last few months. According to a report by Glassnode published at the end of February, Binance saw five times more signups than Coinbase in the first two months of 2021. 

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