- The yen rose against the US dollar after Japan increased its interest rates for the first time since 2007.
- This caused market volatility across traditional finance (TradFi) and decentralized finance (DeFi).
- However, centralized exchanges’ (CEXs) spot and derivatives trading volume spiked by 5.38% last month, according to CCData.
- Crypto.com also broke its spot trading volume records by 38.7% despite the economic turbulence.
CCData’s latest report revealed that the Japanese yen carry trade has boosted CEXs’ trading volumes in unexpected ways.
Following the Bank of Japan raising its interest rates in March, the yen has appreciated by ~12% against the US dollar from July 1 to September 6 (albeit not without fluctuations).
Interestingly, CEXs’ combined spot and derivatives trading volume rose 5.38% to $5.22T in August.
The same month, Crypto.com also hit its highest monthly spot trading of $104B (a 38.2% increase).
The report shows that crypto traders seek out spot and derivatives trading during volatile economic conditions. But why?
CEXs’ Trades Spike Despite TradFi Volatility
According to CCData, CEXs’ spot trading spiked by 7.06% to $1.54T, and derivatives trading volumes appreciated by 4.70% to $3.68T in August over the yen ‘unwinding.’
The increase in trading activity follows a highly volatile month which saw the digital assets slump to new lows, driven by concerns in the TradFi market over the unwinding of Japanese Yen trade and the subsequent recovery in the weeks after.CCData
Throughout August, the yen was only above the US dollar by ~1.34%. However, it has shot up by ~4.53% in six months and ~2.51% over the past five days.
CCData shows that more traders bought and sold derivative contracts (futures and options) in August. This enables them to bet on price changes for future profits without holding an asset.
During market instability, traders are often attracted to profiting from short-term price volatility.
Crypto.com Hit Highest Ever Monthly Spot Trades ($104B).
Out of major CEXs, the new report shows that Crypto.com came out on top last month. Its spot market shares climbed by 6.21%, and derivatives trading spiked by 38.2%, reaching $104B – its highest since 2022.
During the same time, it also made the most significant gains in market share, rising by 1.42%.
However, because of liquidations spiking over yen concerns, the funds investors use to bet on retail derivatives exchanges slumped by 15.7% to $45.8B.
Open interest positions on some major exchanges also significantly dropped. Binance was hit the worst, with its open interest rates falling by 21.4% to 14.6B.
Verdict – TradFi Has a Ripple Effect on Crypto
CCData’s 2024 August report shows a notable shift in crypto market dynamics following volatility caused by the yen’s upswing.
While CEX trading volumes have risen, they have also witnessed a notable drop in open interest rates. This shows the high stakes involved in using market volatilities and serves as a warning of quick gains and steep losses in crypto trading.
Beyond this, the report is a stark reminder of the ripple effects TradFi has on DeFi. It highlights the need to keep a close eye on both markets to gain the upper hand.
Resources
- CCData Exchange Review (CCData)
- Japan’s yen has seen wild swings this year — is it still a safe-haven asset? (CNBC)
- Japanese Yen to United States Dollar (Google Finance)
Disclaimer: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.
Our Editorial Process
The Tech Report editorial policy is centered on providing helpful, accurate content that offers real value to our readers. We only work with experienced writers who have specific knowledge in the topics they cover, including latest developments in technology, online privacy, cryptocurrencies, software, and more. Our editorial policy ensures that each topic is researched and curated by our in-house editors. We maintain rigorous journalistic standards, and every article is 100% written by real authors.
