Binance was the key driver of September's 48% industry wide volume decline, with the platform's seven-day average bitcoin spot volume falling by 57% since the beginning of the month, according to crypto research firm K33 Research.

Bitcoin BTC -3.029% spot volumes fell a further 8% over the last seven days from last week’s 35-month low, fueled by the fall in activity on Binance compared to relatively stable volume across other spot exchanges combined, K33 Senior Analyst Vetle Lunde and Vice President Anders Helseth noted in a report. 

BTCUSD spot volume. Image: K33 Research.

The ongoing battles Binance faces with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) could be deterring market makers from trading on the platform, the analysts said, accounting for part of this decline and casting a shadow over the entire market. However, rival crypto exchange Coinbase, which is also facing a lawsuit from the SEC, witnessed 9% growth in bitcoin spot trading volume this month, they added.

Despite the trading volume decline, of the majors, bitcoin currently leads the way in a spot-driven rally, pushing prices 8% higher over the last week to trade at a three-week high, the analysts noted. Ether and BNB -2.77% are also up 6% each during the period, while Toncoin launched into the top 10 cryptocurrencies by market cap after rising 45% in seven days.

Top three market cap performance. Image K33 Research.

Mixed sentiment among institutional traders

Lunde and Helseth said indicators also suggest a growing bullish outlook among derivatives traders on CME, marking a departure from the bearishness that dominated since mid-August. The past week alone witnessed a 19% surge in bitcoin open interest from active market participants, with futures premiums climbing, they said.

However, the derivatives market isn't entirely bullish. CME’s ether open interest declined by 17% over the past week, with ether futures maintaining a relative premium discount to bitcoin as noted by the analysts last week. This indicates that speculators remain less enticed by the prospect of an ether ETF and the potential market impact of an approval, they added.

Crypto specifics, not macro, now dictate the crypto markets 

In a significant shift from earlier trends, 2023 has seen the crypto market's direction largely influenced by crypto-specific events, Lunde and Helseth argue. Factors such as short squeezes, ETF news and sell-side pressures from bankruptcy estates and the U.S. government have emerged as dominant market influencers. This change is evident when observing bitcoin's correlation with traditional indices like the S&P 500 and the DXY, which have notably diverged since the start of the year, the analysts said.

The U.S. Fed will announce its latest interest rate decision at 2 p.m. ET today, with a pause at 5.5% expected. Despite potential short-term volatility during and post-meeting, any impact on the crypto markets will likely be short-lived Lunde and Helseth said, with the diminished correlation to traditional markets making macroeconomic data less relevant to current trading decisions.

BTC rolling correlation with the S&P 500. Image: K33 Research.