04 Oct 2022

Bitcoin trading volumes in GBP pushing to new ATH

British bitcoin trading volumes soared to new all-time highs last week as the GBP pushed to new all-time lows vs. the US Dollar.
Source: Tradingview (Binance, Coinbase, Kraken, Bitfinex, Bitstamp, Gemini)
Last week, the British Pound plunged to a new all-time low versus the US Dollar amidst a feisty week in the UK pending proposed and later abandoned tax cuts. Amid the GBP plunge, BTCGBP volumes soared.BTCGBP pairs saw trading volumes climbing above 47,000 BTC last Monday, after having experienced growth throughout the latter parts of September. Most of the growth was concentrated in spiking volumes on Bitfinex.The 7-day average BTCGBP trading volume reached a new all-time high, surpassing the May 2021 peak last week. Similar tendencies occurred in ETHGBP. Structurally, the situation resembles what we saw in the Russian ruble and Ukrainian hryvnia earlier this year.The most likely explanation behind the soaring GBP volumes is market maker rebalancing, as we elaborate below, but flows may also be exaggerated by crypto gaining mind share amidst declining trust in the British Pound.
Market makers cautious amid the GBP plunge
The GBP volatility last week was highly unusual, creating opportunities and price discrepancies. Volumes soared coinciding with the GBPUSD bottom early Monday last week. Adjusting the BTCGBP pair to USD shows that the BTCGBP traded at a significant discount to dollar spot amid the height of the pound frenzy.
Source: Tradingview (Binance, Coinbase, Kraken, Bitfinex, Bitstamp, Gemini)
The charts illustrate the dollar-adjusted premium or discount in Bitfinex’s BTCGBP pair last week. As the GBP bottomed vs. the USD, BTCGBP traded at a massive discount compared to BTCUSD. The discount turned into a prolonged premium with certain wicks deep into discount terrains as GBP traded in a highly volatile environment. The prolonged structural mispricing may have been caused by market participants seeking to reduce GBP exposure in the uncertain environment. It’s likely that the predominant force was market makers reducing their exposure. Substantial wicks towards the downside during the highly volatile days imply inefficiencies, lagging, and arbitrage opportunities that active market makers would have taken during regular market conditions.
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