LMAX Digital volumes ascended to new heights on Wednesday. All of the volatility in the market resulted in record breaking numbers across the board. Total notional volume came in at $6.5 billion, 169% above average 30-day total volume. Bitcoin volume ran up to a record high of 3.4 billion, 165% above the 30-day average. Ether volume rocketed to its own record high of $1.7 billion, 181% above 30-day average volume.

Average trade sizes continued to hold steady through the wild action. Bitcoin average trade size actually ticked up a bit from the previous day to around $11,000. Ether average trade size kept right near $8,000. Total notional volume at LMAX Digital over the past 30 days has now crossed the $70 billion mark, coming in at $72.2 billion. The average daily trading range for BTCUSD is $4,806. The average daily trading range for ETHUSD is $459.

Wednesday was a dark day for crypto markets, with price declines accelerating at rapid rates before finally finding demand. Bitcoin was down just over 30% on the day at its worst, while Ether declines were even more unsettling, down as much as 44% on the day. We had already been warning of capitulation in the market given parabolic price action in 2021 and it all finally came to a head in Wednesday trade.

There were many contributing factors behind the intensification of selling. Beyond severely overbought technicals, there was the liquidation of leveraged long positions, and there were dealers short gamma forced to establish short exposure as a hedge against their net long exposure.

Fundamentally, there has been a lot of talk about the negative environmental impact of cryptocurrencies and regulatory headwinds, though we think these stories are nothing more than excuses to justify what was an already frothy market due for correction.

As wild as the Wednesday move was, this is not an uncommon development for the emerging asset class, and we have seen periods of aggressive selling many times before. If anything, the drop should be viewed as yet another opportunity for cryptocurrencies to prove just how resilient they are, as weaker longs are flushed out and replaced by more committed longer-term players at higher levels than before.

Still, we would not rule out the possibility for additional turbulence in the crypto market over the coming months, particularly in light of a fragile global economic recovery now threatened by a rapid rise in inflationary pressures. This could force central banks to be less accommodative with monetary policy, which ultimately will have a negative impact on risk correlated assets.

And while Bitcoin’s store of value proposition is attractive, at the moment, even Bitcoin is still viewed by many as an emerging asset tied to risk sentiment.