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Jul 19
2020
Analyzing The Growth of Altcoin Perpetual Futures Landscape



The unusual stagnation in Bitcoin’s price has shifted investors’ appetite towards altcoins as prices surged to new all-time highs. This explosion in Altcoin demand has ushered in an altcoin season, as seen by Bitcoin’s declining market capitalization dominance. 


Source: Tradingview


Bitcoin dominance has declined since hitting a high in the first week of May. Since then, Bitcoin has lost its dominance as Altcoin market capitalization gradually rose before a sharp surge in the first week of July. Today, Bitcoin dominance is at its lowest since February 2020.  


The recent price surge has led to comparisons to the euphoric bull market of 2017. However, it is essential to note that there is a significant difference with altcoins today. In the present landscape, altcoins have established an extensive blockchain infrastructure with constant improvements to expand the existing ecosystem. As such, the optimism surrounding altcoins presently is supported by improved fundamentals and increased use of cases of their underlying technologies.


Dawn of an Altcoin season as Futures volume grow


The renewed altcoin interest has caused a surge in trading volume on perpetual contracts across major exchanges. Since July 1st, total Altcoin perpetual futures volume across major exchanges has grown from $2 billion to $5.1 billion, a 150% increase. 


On Binance, daily volume across altcoin futures has multiplied exponentially from under $500 million on July 1st, to more than $2 billion today, a 4x increase in 2 weeks.  


Evolution of the Altcoin Futures market share


Binance Futures is now the leading Altcoin perpetual futures exchange as market share increased from 19% to 41% since mid-June. In contrast, Huobi, who trailed in second place with a market share of 31%, has seen its altcoin futures market share declined from 51% to 31% in the same period. The changing altcoin futures landscape has been largely attributed to Binance Futures’ continuous effort in expanding its product range of perpetual contracts to provide enhanced diversification and better hedging options for its users.


Binance Futures was the only exchange that reported growth in altcoin futures market share as volume quadrupled in less than a month. Meanwhile, market share for OKex and Bitmex remained unchanged.  


The rise of third-generation cryptocurrencies


On Binance Futures, LINK has rapidly gained popularity, becoming the second most traded altcoin contract after a dominant display in the last 2 weeks. 24-hour volume on LINKUSDT grew from $50 million to $590 million, a 10x increase in less than 30 days. Similarly, ADA was among the few altcoins that have delivered phenomenal returns in recent weeks as daily volume grew from $40 million to $170 million, a 4x increase in less than 2 weeks


With the introduction of new contracts, volume from altcoins has contributed significantly to overall volume growth. New additions, particularly in the DeFi space, such as COMP and KNC, have seen substantial growth in volume as prices break above all-time highs. 


Over the past two months, DeFi tokens have dominated headlines as the Total Value Locked (TVL) across all decentralized finance markets crossed above $2.5 billion. This milestone also indicates that DeFi assets have doubled over the past 30 days as the smart contract-based lending and borrowing ecosystem gains traction among investors.


Source: Defipulse


In a further boost to altcoins, Binance Futures has recently added ZRX, ZIL, OMG, ALGO, and DOGE, further expanding its selection of Altcoin Futures perpetual contracts. 


Binance Altcoin Futures: Top 10 by volume


ETH contracts remained the most traded altcoin futures on Binance, generating over $7 billion in volume, despite its declining volume percentage in the last 30 days. LINK trailed behind in second place with over $3.3 billion in volume, while reaching a 24-hour ATH of $590 million. ADA, VET, and XTZ also saw substantial growth, recording over $3.2 billion, $2.2 billion, and $1.4 billion in volume respectively. 


What’s driving the Altcoin Futures surge?


In the last two months, there has been enthusiasm around the upcoming upgrade of Ethereum to the Proof-of-Stake protocol. Therefore, this has led to increased trading in Proof-of-Stake coins.


In the following, we analyze the most actively traded cryptocurrencies and what might be driving the price action.


1. Cardano (ADA)

ADA is up over 200% since its lows of mid-March. ADA’s bullish sentiment was primarily due to anticipation of its Shelley upgrade. This improvement will transition its blockchain into a Proof-of-Stake. The proposed network upgrade, which is scheduled to go live in July, has drawn interest to ADA, with many expecting a positive effect on its price. 

As observed, both volume and open interest in ADA contracts have grown significantly since the beginning of July. On Binance, ADA perpetual contracts recorded an ATH in 24-hour volume on July 9, with over $400 million traded. 


The upcoming Shelley upgrade will further enhance the Cardano network to be 50-100 times more decentralized than other well-known blockchain networks. With this improvement, Cardano might be efficient enough to support large-scale DeFi applications, making ADA a lucrative prospect for long-term investors.


2. Chainlink (LINK)

LINK is the native coin of blockchain data oracle, Chainlink. It has proven to be one of the most influential movers in the cryptocurrency markets of recent months. This was proven once again as LINK broke above the previous all-time high of $5 and surged 85% higher towards $8.50.


LINK perpetual contracts have been heavily traded in recent weeks, with close to $600 million traded in a single day. Unsurprisingly, this record-breaking run has driven open interest to new highs as investors seek to participate in the long term price trend. 


Chainlink has progressed rapidly in recent months as major tech companies join the network, the most notable inclusion was China’s Blockchain Service Network (BSN). Correspondingly, this resulted in increased usage of LINK tokens. For instance, on-chain data indicated that the number of active addresses has risen from 970 to 14,255 in the first half of 2020 — nearly 15-fold growth.


3. VeChain (VET)

VeChain is a blockchain-based platform focused on enhancing supply chain management processes. In the last two months, prices of VET have surged from $0.005 to $0.02, a 300% increase. Correspondingly, daily volume on VET contracts grew from under $20 million to a high of over $300 million on July 9. 

VET's massive price surge is driven by the expansion of its use case across various industries. In particular, its partnership to develop a drug-tracing platform for pharmaceutical giant Bayer proves VeChain’s viability and flexibility across the supply chain sector.


In summary


With the excitement surrounding altcoins’ improved blockchain landscape, investors’ appetite has shifted towards altcoins across spot and derivative products. The increased trading activity has caused a reorganization of market share across derivative exchanges. We observed that market share has shifted in favor of Binance as the exchange dominated altcoin futures volume. In particular, contracts such as LINK and ADA, where Binance processed the most volume in the industry. Binance’s extensive selection of Altcoin Futures contracts has provided users with more trading opportunities in this Altcoin season. 


Further findings also suggest that altcoin bullish sentiments have favored third-generation cryptocurrencies, as investors begin to recognize their real-world applications, as well as game-changing technologies that may lead to greater mass adoption of cryptocurrencies in the future.