Cryptocurrency spot trading volume in June plummeted by 36%, but institutional investors remain keen on Bitcoin.

The cryptocurrency market data provider CryptoCompare released the "Cryptocurrency Exchange Report" for June 2020 yesterday. The report indicates that the cryptocurrency market saw a significant 36% decline in trading volume in June compared to the previous month, making it the worst-performing month of the year. However, the total trading volume of Bitcoin options on the Chicago Mercantile Exchange (CME) increased by 41%, suggesting that institutional investors still have a strong interest in Bitcoin.

Overall Market Trading Volume Declines

CryptoCompare regularly releases its "Cryptocurrency Exchange Report" every month, which aims to provide a detailed analysis of the spot market, derivatives market, decentralized trading market, trading fee models, and other data to help cryptocurrency enthusiasts, investors, industry professionals, and regulatory bodies gain a better understanding of the market.

CryptoCompare noted in the report that the trading volume in the cryptocurrency market saw a significant decline in June. Despite June being considered the most intense Altcoin season of the year, with many altcoins (especially DeFi concept coins) experiencing significant price surges, the overall market trading volume decreased significantly. According to the data in the report, the spot volumes of top-tier exchanges and other exchanges decreased to $177 billion (-36%) and $466 billion (-53%), respectively.

Throughout June, the spot market trading volume saw a significant decline, with the daily trading volume now only about half of the previous month's daily volume. This substantial decline is attributed to the decrease in Bitcoin volatility, which affected investors' trading appetite. This situation also impacted the derivatives market. The report stated:

"Cryptocurrency derivatives trading volume in June decreased by 35.7% to $393 billion, the lowest monthly trading volume so far this year."

Institutional Investment Interest on the Rise

Interestingly, while the total trading volume in the cryptocurrency market decreased significantly due to low volatility, regulated options products seem to be gaining popularity in such market trends. In June 2020, the total trading volume of Bitcoin options on the Chicago Mercantile Exchange (CME) increased by 41%, reaching a record high of 8,444 contracts traded. Although CME's BTC futures trading volume in June dropped by 23%, it still stands as the second-largest monthly trading volume in 2020.

As institutions continue to enter the Bitcoin market, this trend may persist and bring benefits to the overall market. However, before this happens, the industry ecosystem must address many shortcomings in the trading market. Institutional investors require a secure and transparent trading environment, yet many cryptocurrency exchanges are tainted with practices such as wash trading, front-running, and market manipulation. As Chainalysis Chief Economist Philip Gradwell stated:

"If you want to deploy large amounts of capital into cryptocurrencies, you need to have confidence in the security and transparency of these exchanges... If you're an exchange and you have good reasons to report real trading volumes, then you can attract institutional capital, but if you lack these incentives, they won't come in."

There are still many areas in the cryptocurrency market trading environment that need improvement. These enhancements could pave the way for the long-awaited Bitcoin ETF and the issuance of other traditional financial products, further attracting institutional investors to enter the cryptocurrency market.