The entire crypto market has undergone a large shift over the last few years since the entrance of big, institutional-sized actors. This shift has only increased in speed since the launch of ETF products in US stock exchanges. Where once the main driver of crypto trading volume was direct buying and selling of assets, called spot trading, we are now seeing hedging activity become responsible for upwards of 90% of all crypto trading volume.
While markets are not completely transparent in terms of who is doing what, it is safe to say that hedging is a clear proxy for institutional activity. And now that hedging is making up the vast majority of trading volume, professional traders are now representing what could be the majority of all crypto trading volume.
What hedging means during a market downturn
Hedging is a trading action that can be broadly defined as using derivatives like perpetual futures to limit or offset risks of holding assets directly. For example, a trader might hold BTC while also opening a short position as a strategy to limit losses in the event of a major price drop. Hedging by itself isn’t a directional bet. It’s not about predicting whether an asset like BTC will go up or down in price. Instead, it’s a technique that is most commonly used by professionals as a means of risk management.
During a turbulent market like what we saw in Q1, this risk management approach lets investment firms protect their capital without needing to sell assets. This is important because selling assets has potential tax consequences. In addition, when big players sell, it could trigger a larger selloff event that could further hurt asset values. This protectionist mindset demonstrates both market maturity and institutional players’ long-term investment strategy into digital assets.
Hedging is generally not harmful or destructive to a market. On the contrary, hedging can help to stabilize a market and limit sharp price moves. Hedging can also increase liquidity and volume in a market, making trades smoother.
In a Coinglass report covering Q1 2026 market activity, the author explains that the current ratio of spot to derivatives trading is 9.6x. That means for every dollar spent on a spot trade, almost ten are being put up in the derivatives markets which includes hedging activity. The Coinglass piece explains this further, writing: “during market adjustment phases, traders are more inclined to use derivatives for hedging and short-term trading rather than making directional allocations in the spot market.”
Most activity is centralized
A significant amount of this institutional activity is occurring on Binance, with the report stating that “Binance’s cumulative Q1 derivatives volume was approximately $4.90 trillion, with an average daily volume of about $55.0 billion. Among the Top 10 exchanges, Binance held a share of 34.9%, firmly in first place.”
Additionally, according to CryptoQuant, perpetual futures now define crypto market activity with $3.5T in monthly volume, over 4x larger than spot ($0.8T). Binance leads the perpetual futures market with $1.4T in monthly volume, 2x the next exchange (OKX, $0.7T), underscoring its role as the primary engine of liquidity, price discovery, and exchange revenue growth. This shows Binance continues to be the exchange of choice across all activity—trusted by users for depth, execution, and reliability.
Binance Co-CEO Richard Teng framed this shift as a clearer view into how liquidity and price discovery function in a normalized market, noting, “As trading activity normalized in Q1, market structure became clearer: derivatives continued to lead price discovery, while liquidity consolidated on platforms able to support scale. In a lower-volume environment, Binance’s consistent leadership across both spot and perpetual markets reflects the value users place on deep liquidity and reliable execution.”
Crypto news site CryptoPotato echoed this data, noting: “On Binance, derivatives volume reached approximately $1.54 trillion, which is nearly six times higher than its spot trading volume of $264 billion.” The article also observed the general market trend that “most traders are currently engaging with futures, margin, and other leveraged products” instead of spot trading. This trading, the article specifies, is “heavily centralized among a handful of platforms,” suggesting that traders are primarily keeping their activity on preferred platforms.
From business hours to always-on
One of the more significant causes of institutional activity moving into derivatives and hedging is the availability of perpetual futures contracts on leading platforms. Binance, which is home to the majority of derivatives trading globally, explained their advantage in a recent blog post, writing that their perpetual futures “offer institutional desks 24/7 market access, instant settlement, and capital-efficient leverage on both digital and traditional assets from a single platform.”
The post goes on to point out that big players are moving away from restricted traditional finance platforms that only allow moves during business hours. They note that “even the most well-resourced desks have limited options until Monday morning,” meaning that if professionals want to respond to global events quickly and without limitations, moving to perpetual futures on a platform like Binance is likely their only impactful option.
This advantage can be seen in the data, with blockchain research group CryptoQuant citing that in Q1 of this year, trading “overwhelmingly concentrated in derivatives, with perpetual futures reaching $3.5T in March” and pointed to Binance’s market leadership with the platform hosting 40% of all derivatives trading volume.
Source:: Institutional Hedging Now Drives 90% of Crypto Trading Volume