On-chain data shows that derivative exchanges have observed elevated activity as Bitcoin has rallied towards the $29,000 level.

As pointed out by an analyst in a CryptoQuant post, the latest price increase is mainly driven by the derivatives. The indicator of interest here is the “trading volume ratio,” which measures the ratio between the Bitcoin trading volume on the spot exchanges and that on the derivative exchanges.

The “trading volume” here naturally refers to the total amount of the cryptocurrency that investors are transacting/moving around on a platform or a group of platforms.

When the value of the trading volume ratio is high, it means that the spot exchanges are observing a high amount of activity when compared to the derivative platforms. On the other hand, low values of the indicator imply the derivative exchanges are the ones seeing a relatively high volume at the moment.

Now, here is a chart that shows the trend in the Bitcoin trading volume ratio over the past year:

As displayed in the above graph, the Bitcoin trading volume ratio had taken a plunge back in March and has since moved mostly sideways around pretty low levels.

This would suggest that there has been little spot activity in the market during this time, at least when compared to the volumes that the derivative exchanges have been observing.

Interestingly, despite the price of the asset registering a sharp jump towards the $29,000 level during the past day, the ratio has failed to show any uptick, implying that the spot volumes continue to remain low relative to the derivatives activity.

This fact would suggest that the latest rally may have in fact received its fuel from the derivatives, rather then the spot market. Historically, rallies that have started along with rising spot trading volumes have been the ones more likely to sustain for longer durations.

From the chart, it’s visible that the Bitcoin price surge back in January of this year had kicked off when the trading volume ratio had been at relatively high levels.

Similarly, the recovery rally back in March had also started when the indicator had seen an uplift (although a much smaller one). As mentioned earlier, the metric had plummeted shortly after this rally had occurred and has been at low levels since then. In this time, BTC has been unable to record any sustainable move.

In the past day, however, things have obviously looked different, as the rapid price surge has been unlike anything the asset has displayed recently. Still, the fact that the spot volumes are still low means that the rally “appears weaker when compared to the solid rallies led by spot market at $16,000 and $19,000,” according to the quant.

It now remains to be seen if the ratio will continue to be low in the coming days, or if an uptick in spot activity would appear after all.

At the time of writing, Bitcoin is trading around $29,100, up 12% in the last week.

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