The volume in Bitcoin Futures Trading is 9 times as high as in Bitcoin Spot Trading, making the market more responsive to price fluctuations. This time, I'll start with some minor explanation between the spot- en futures market. The spot market is the traditional way of trading where Bitcoin can be bought or sold directly. This involves actual Bitcoin that can also be sent over the Bitcoin blockchain. The spot market is transparent and has a history dating back to the first transaction on the Bitcoin network. In addition, there is a futures market where investors speculate on the future value of Bitcoin. Instead of owning Bitcoin directly, speculators enter into a contract to buy or sell Bitcoin on a certain date in the future at an agreed price. This allows investors to take advantage of expected price movements of Bitcoin without actually owning Bitcoin. At this moment, the trading volume in the futures market is around 900k on a daily basis, while the volume in future trading is around 100k. This makes the futures/spot ratio 9:1. The biggest reason for this high ratio is because of Binance which has disables zero-fee spot trading on most of their pairs. This caused a huge drop in the spot-trading volume on spot bitcoin, which makes the ratio out-of-sync. Regardless of the reason, the previous times when the Bitcoin dominance ratio was high compared to the previous period, it was 7x near the top and 1x near the bottom (July 2021). Nonetheless, it is guaranteed that we will see a period of extreme volatility.

Written by maartunn