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SHIB Trading Volume on Derivatives Market Hit 78x Increase After 300% Growth

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Fri, 10/08/2021 - 08:51
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Arman Shirinyan
While SHIB is correcting by 40%, derivative tied to it is growing significantly
SHIB Trading Volume on Derivatives Market Hit 78x Increase After 300% Growth
Cover image via stock.adobe.com

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After a major 300-400% price increase on the spot market, the SHIB meme token faced almost a 40% correction and is currently trading with a 5% daily discount. In addition to volatile market movements, volumes on the derivatives market have also increased significantly, which is the first indication of a high number of overleveraged positions on the market.

Derivatives Volume
Source: IntoTheBlock

SHIBA perpetual swaps faced a 78x volume increase compared to Oct. 1. The volume has crossed the $5 billion mark for the first time ever. The high activity on the derivatives market is an indication of a number of things happening on the market.

Overleveraged growth

High volume on the derivatives market for any position is usually followed by the high number of leveraged positions, which allows traders to buy more than they can actually afford. By lending funds to traders, exchanges create more demand for an asset and move its price significantly higher than is possible without leverage.

SHIB Daily Chart
Source: TradingView

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SHIB Is Hitting Crypto Market with Disruptive 370% Rise, Bloomberg Reports

Abnormal volatility

Leveraged long positions fuel the growth on the market, but once traders decide to exit their positions and take profits, other traders have to execute their buy orders. But since the market is highly leveraged, the number of buy orders usually does not keep up with the price, which then leads to the formation of a thin orderbook. After selling pressure increases, the price of an asset rapidly falls due to the inability to keep up with sell orders.

At press time, SHIB trades with 5.5% of the daily loss, after correcting for almost 40% overnight.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.