Binance Played a Key Role in a Recent Bitcoin Rally

Kaiko’s recent analysis points towards some key data on Binance that suggests the recent Bitcoin price rally was in the crypto exchange’s order books

Binance’s Role

Market data provider, Kaiko, points towards Bitcoin whales’ flurry of activities on Binance on the BTC/USDT pairing as one of the major contributors to the recent Bitcoin rally. 

Kaiko’s recent research has offered new avenues of consideration regarding Bitcoin’s surge. 

In its blog post on October 18, the team made this observation – Analysts love to speculate the source of strong price movements, however this is a notoriously difficult task considering price discovery is a complex process involving both spot and derivatives markets across dozens of exchanges. However, Bitcoin’s latest rally which took off around October 10th shows clear signs of (at least partially) originating on Binance’s BTC-USDT spot pair.

In the said report, some key metrics that are worth noting are the strong volatility in trading volume on the Tether (USDT) market between October 5th – 10th and the BTC/USDT pair in the spot market increased by 17% to a yearly high of 82%. 

Source : Trading volume on the Binance’s Tether market surged relative to other exchanges to reach its highest level since April

Strong Indicative Correlation 

The relationship between volume and price does not necessary prove causation. But, the minute-by-minute breakdown of volume on Binance does correspond with the Bitcoin price. 

Source: The spike in volume on the Binance platform is immediately followed by Bitcoin’s price movement 

In normal circumstance, traders will avoid large trades within a short span of time to avoid slippage. Slippage happens when a trader is required settle for a different price between the point of entry and the execution of shares because of high volatility. 

It is difficult to speculate the reason for the abnormal activity on the Binance platform and the most probable reason points towards the anticipation of Bitcoin Exchange Traded Funds (ETFs) by the US Securites and Exchange Commission (SEC). The long awaited Bitcoin ETF was finally approved and Bitcoin (BTC) at the time of writing was trading at $65,097 after reaching an all time high of $66,930 on CoinMarketCap.

Positive Market Sentiment 

The recent rally has lifted the market sentiment. The current market capitalization stands at $2.6 trillion. 

Source: The market sentiment has turned bullish as Bitcoin breached its all time high

The recent fine on Bitfinex and Tether by the Commodity Futures Trading Commission (CFTC) has removed a certain amount of uncertainty from the market. Tether (USDT) is the most used stablecoin for trading and more than half of all Bitcoin trades are concluded using the Bitcoin/USDT pair. 

When the sentiments are positive, traders will take additional risks by leveraging on longs. Therefore, one very important data to observe is whether the buying interest comes from the spot market or from margin trading. If the renewed buying interest is from the latter, a dip will send a wave of cascading liquidation which we have seen on numerous occasions in the past. 

Big exchanges such as Binance, Coinbase and Houbi will continue be major contributors to the crypto market. Large volumes of trades on these exchanges ensures that the maket remains liquid and the risk of slippage is reduced. 

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