In this line, trading using traditional currencies has spiked to historical levels with a surge of about 30% following years of stagnant volumes, Bloomberg reported on October 10.
The cash return has been attributed to volatility in risky assets such as Bitcoin (BTC) and the general crypto sector amid prevailing interest rate hikes and geopolitical tensions.
The primary beneficiaries of the situation include Deutsche Bank, UBS Group AG, and JPMorgan (NYSE: JPM), which control a market share of 30%. In particular, JPMorgan recorded a 15% increase in its fixed-income markets business in the second quarter.
At the same time, UBS pointed out foreign exchange was the main contributor to its revenue, which surged by 19%. Elsewhere, Deutsche Bank revenue spiked 32% to emerge as the bank’s best second quarter in a decade.
“Crypto seemed to be having all the fun until the central banks started breaking things. It took inflation to blast the secular decline in currency volatility as central banks unleashed years of suppression. Volatility creates opportunity, and it’s a trader’s best friend,” said Tanvir Sandhu, chief global derivatives strategist at Bloomberg Intelligence.
Bitcoin volatility slows
At the same time, it’s worth noting that the crypto market has plunged in 2022, but the Bitcoin volatility Index has subsided since a peak in May. In comparison, Deutsche Bank’s and JPMorgan Chase & Co.’s currency volatility trackers are at the highest in a decade, apart from a spike recorded at the pandemic’s onset.
Analysts are opining that the gains by major banks show that investors are migrating to a higher range for interest rates and bond yield elements likely to be accompanied by higher currency volatility.
Amid the prevailing economic conditions, the U.S. dollar has stood out as a critical hedge across markets as other global currencies corrected significantly. As reported by Finbold, the rising dollar saw investors in other regions turn to Bitcoin as a hedge or profit arbitrage.
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