fter reaching record highs in March, cryptocurrency trading volumes pulled back significantly in April according to data from digital asset data provider CCData. The cumulative monthly volume across spot and derivatives markets fell 43.8% to $6.58 trillion compared to March's all-time high of $9.12 trillion. This reversal ended a consecutive seven-month streak of increasing volumes. 

The spot market, where cryptocurrencies are bought and sold for fiat currencies, contracted by 32.6% to $2.01 trillion for the month. Derivatives trading, such as futures and options contracts, took an even larger hit and was down 47.6% to $4.57 trillion in total monthly volume. This signaled that traders were less willing to take on leverage via derivatives and favored taking profits in the spot market during the volatility.

Image showing monthly spot vs derivatives volume
Monthly Trading Volume

Binance Leads But Sees First Decline Since Last Fall

Leading crypto exchange Binance remained the largest platform by overall trading volume, however, even it wasn't immune to the industry-wide slowdown. Since last September, Binance experienced its first monthly volume decline with a 39.2% drop to $679 billion across its spot and derivatives markets. This came after the platform had continuously gained market share since the start of 2022.  

The pullback in trading at Binance coincided with the resignation of its CEO Changpeng Zhao in November after he pled guilty to money laundering charges in the U.S. His replacement Richard Teng has since helped stabilize volumes, with Binance reclaiming over 30% of the total spot market in April. Still, broader industry conditions proved too difficult as even the dominant exchange saw reduced activity from traders.

Image showing monthly AA-A spot exchanges volumes
Monthly Spot Exchange Volume

Traders Take Profits After Big Gains

Much of the volume retreat in April can be attributed to traders choosing to lock in profits after huge market rallies in prior months. The total cryptocurrency market hit new all-time highs in value in November and had sustained periods of gains throughout the winter and spring. But macroeconomic uncertainty, renewed geopolitical tensions, and fluctuations in stock indices appeared to give some pause.

Bitcoin, the largest crypto by market cap, plunged nearly 15% in April alone effectively wiping out its returns for the year to date. This sizable correction was likely a triggering event that caused large and small traders to de-risk and take profits following massive accumulations. With the industry maturing, pullbacks are to be expected even if the long-term trend remains bullish. April's trading slowdown may prove to be only a temporary rest on the road to new volume highs once stability returns.

Derivatives Premium Hits Seven-Month Low

One surprising development was the outsized decline in derivatives volumes compared to the spot market. This divergence suggests traders were turning away from leveraged bets en masse. One metric that reflects risk appetite for leverage is the percentage of total trading done via derivatives contracts rather than spot markets. 

In April, derivatives represented a majority 70% of all cryptocurrency trading volumes, down from an 80% premium just a month prior in March. This seven-month low in derivatives activity affirms the view that traders closed leveraged long positions amid heightened volatility. With crypto costs falling and user bases growing steadily, overall industry fundamentals remain solid even if short-term sentiment needs to stabilize before another leg higher.

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