Crypto market gains 17.6% – Why $421B perp volume raises a red flag

Binance’s monthly report suggests the crypto rally is off to a good start.

From a technical standpoint, the total crypto market cap grew by 17.6% to $2.70 trillion, with Bitcoin’s [BTC] price climbing by 24.8% during the last seven days, marking one of the best weekly rallies since 2020.

But one crucial change stands out. As the chart below highlights, equity holders increased their crypto allocations from 64% to 72%, while also decreasing their allocations to stablecoins by 22%. At the same time, a TradFi-perps share of trading volumes decreased from 40% to 20%, while crypto perpetual volume jumped to $421 billion in the week ending the 23rd of August. 

This suggests that investors are adding cash to crypto as opposed to de-leveraging stablecoins. The key takeaway? Investors are not rotating out of equities but buying crypto in addition to their equity holdings.

Notably, the same pattern can be seen in derivatives. Weekend TradFi-perps volume jumped from $5 billion in January to $53 billion in August, indicating the growing demand for 24/7 trading. In fact, the weekend volume averaged at 17.1% of the weekday levels, but reached 40% during major market-moving weekends.

In essence, traders are increasingly taking advantage of crypto derivatives to speculate when traditional markets are closed. But does this mean September has gotten off to a speculative start? Binance’s report suggests the August rally may not be sustainable. So, with TradFi-perps volume moving on-chain, the key question is whether this reflects greater market engagement or growing speculative risk.