Investors in the cryptocurrency ecosystem have increased their exposure to derivatives markets, with trading volume on central exchanges rising to $3.12 trillion in July, up 13% from the previous month, according to researcher CryptoCompare.

Derivatives trading volume on major exchanges hit the $245 billion mark on July 29, up 9.7% from its daily high of $223 billion throughout June, according to CryptoCompare data.

The move was marked by signs of recovery from a crash in futures/options contracts.

Crypto derivatives are secondary contracts or financial instruments whose value is derived from a primary underlying asset such as Bitcoin (BTC), Ethereum (ETH), or other alternative currencies.

Futures are investment contracts that enable investors to gain exposure to an asset without owning it directly. Futures allow traders or investors to speculate on the future price of the underlying asset.

Options offer traders a unique opportunity to buy or sell crypto tokens at a price. The price of an option contract will vary depending on the time of purchase, the strike price, and the day of expiry. 

CryptoCompare states, “the rise in derivatives trading volume indicates an increase in speculative activity as traders believe there is room for further upside in this rally.”

Previous Fed rate hikes, inflation, and the war between Ukraine and Russia triggered investors to sell cryptocurrencies sharply, causing the cryptocurrency market to plummet.

Lower-than-expected inflation data from the United States boosted market risk appetite, and cryptocurrencies have now recovered.

Bitcoin (BTC) quickly crossed $24,000, and Ether (ETH) also managed to climb back above $1,900 during the intraday.

CryptoCompare pointed out that the market is also concerned about the potential market for the upgrade and merger of Ethereum. This upgrade is expected to increase the network rate of Ethereum, which may help Ethereum to strengthen.

So open interest for ETH derivatives is higher than BTC for the first time.

Derivatives market volume now accounts for 69% of total crypto volume, up from 66% in June.

The prospect of value-adding derivatives has made them popular among retail and institutional investors. While U.S. law remains largely ambiguous, forays into derivatives markets have been a better investment option for most businesses looking to capitalize on asset price swings to make money.

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