On-chain derivatives trading volume declines third week in a row

On-chain derivatives weekly trading volumes have been shrinking for the third consecutive week, indicating a potential lack of risk appetite among traders, based on DefiLlama data.

The declining volume is driven by several factors, including macroeconomic uncertainties like the unclear outcome of the US presidential elections, the rising tensions in the Middle East, and the possibility of no interest rate cuts by the Fed next month.

The sector’s weekly trading volume reached $64.6 billion between July 27 and Aug. 2, its highest since mid-May. However, trading activity has been slumping ever since, falling to $62.9 billion the following week and to $40.4 billion last week.

Notably, the current week has only recorded $5.11 billion in volume, and with only three days left, the sector is on track to record the lowest weekly volume since early 2023.

Arbitrum (ARB) is recovering its dominance on weekly volumes this week, with roughly 18% of all on-chain derivatives trading taking place on the network. Hyperliquid follows closely, accounting for 17% of the volume.

Meanwhile, Blast, dYdX, and Solana (SOL) are still maintaining their dominant spots in the top five largest blockchains by weekly trading volume, with 11.3%, 10.5%, and 8.8% of the share, respectively.

Room for growth

Despite the cooling risk appetite among on-chain traders, the decentralized derivatives market has experienced growing popularity in 2024.

In 2023, the average monthly trading volume of on-chain derivatives was $51.4 billion during the first half, compared to nearly $235 billion in average volume during the first six months of this year — representing a 357% year-on-year growth.

Newcomers like Blast and Hyperliquid contributed to the growth of the on-chain derivatives market size this year, with $234.8 billion and $266.7 billion of trading volume year-to-date.

However, the trading activity on decentralized platforms is still a meager fraction when compared to their centralized counterparts.

According to Coinglass, Binance alone registered $46.2 billion in trading volume over the past 24 hours. Meanwhile, the whole decentralized ecosystem of platforms for derivatives trading registered just $5.1 billion in volume, roughly 11% of the volume traded on just one centralized exchange.

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