After the American government decides to inject fresh funds of almost $2 million into the economy, crypto exchanges are yet to experience any significant increase in trade activity. This development has created a cause for concern among the digital asset ecosystem because there is usually a rise in crypto purchases with exchanges when similar funding programs have been implemented.
Responses to Poor BTC Purchases From The Exchanges
The poor BTC purchases in the last few days are now a cause for concern among the crypto community. Voyager’s CEO preached patience citing that there might still be changes since previous similar programs have never failed to result in massive deposits on exchanges. A spokesperson for Kraken also shares the same opinion with voyager’s CEO saying that customers are still making adjustments, “most traders are still fine-tuning their sales goals.” both Kraken and voyager are U.S.-based exchanges.
What Could Be the Reason for The Low Customer Turnout On Exchanges?
There are various reasons why exchanges are not exchanges are experiencing huge inflows. One possible reason could be the decision of retail traders to temporarily stop trading on cryptocurrencies and in-demand tech stocks – a trend that has been happening since the beginning of the year.
Another possible reason is based on a Bloomberg analysis which indicates a downtrend in call options trading volumes preferred by the Wallstreetbets forum on Reddit.
Other macro-economic factors could also contribute to these poor purchases by retail traders. Since the country’s economy is still recovering from a Covid-19-caused recession, most traders now prefer to spend cash rather than buy digital assets. JPMorgan’s research noted that there has been a huge rise in credit card spends by Millennials, but that cash is not being spent to buy cryptocurrencies.
Another possible theory is that potential traders assume that the twofold price increase in bitcoin, when compared to last year’s price makes it unaffordable again. Fortunately, a bitcoin purchase frenzy might still happen. A statement from the united states IRS states that the new set of stimulus payments will likely be paid this week.
Money is also being steered away from the exchanges because institutions that provide interest-bearing accounts and repetitive reinvestments are expanding their offers. While there is a futuristic optimism for bitcoin and ether, those with cash in hand from the government prefer undue risks and rewards at the moment. Only a few of them are willing to risk their newfound cash on derivatives with small margin profits instead of a slower rewarding spot market.
BTC Dips in Price
Bitcoin bulls are disappointed at this news because they were predicting that bitcoin’s price will rise past the $60K mark when the current stimulus checks were being dispensed. However, this past week saw BTC slip by nearly 3% in price and this week it has declined by a whopping 10.9%. Its price remains at about $51k. Labeling the latest stimulus funding package as a failure seemed too early since the checks are still being distributed.