Bitcoin HODLers Drive Mammoth Decline In Cryptocurrency Trading Volumes — Here's What This Means
- Exchanges decry the decline in trading volumes since the start of the week.
- Retail traders adopting the hodling strategy may be responsible.
- Some analysts believe that a reversal of fortune is around the corner for the markets.
Major crypto exchanges have noted that daily trading volumes are taking a steep dive on their platforms in the face of unsavory prices.
Daily Trading Volumes Are Falling
Retail investors are heeding to the prevailing market sentiments of fear to reduce trading activities. As crypto prices keep dropping, investors are holding onto their coins and staying away from the market.
FTX.US, the United States subsidiary of cryptocurrency exchange giant FTX, has noted a daily trading volume drop on all digital assets traded on the platform.
The company’s president, Brett Harrison, in a statement, said, “To me, it looks like we’re in the period of just decreased volume and subdued trading activity following drops in general.” He stated that during periods like this “usually you will see a lot of quick volume from people trying to sell off during a panic, but then a longer period of decreased volume as people shy away from the market after the volatility.”
Harrison added that for the trading volumes to get back up, retail traders have to be more willing to get back into the market.
Coinbase, America’s foremost exchange, also revealed that they had seen dips in the daily trading volumes of Bitcoin. In a week that saw the digital asset lose about $7,000 in value. The company’s shares also took a hit, it seems, as a result, dropping to $232 per share from $357 in November.
An Executive Director at Oppenheimer & Co., Owen Lau, noted that “Declining price could drive lower trading volume when it gets to the point to discourage traders to get engaged. There is a possibility that digital assets price to go flat such as getting into a crypto winter after a price decline.”
However, Lau noted that prices could start to look up though, stating that more price drops could attract bulls to the market and push prices up. Lau noted that this was very likely with increasing adoption.
Two days ago, the CEO of Galaxy Digital Holdings, Mike Novogratz, a known Bitcoin advocate, disclosed that he was holding on to get back into the market. As the price hovered around $41,990 a couple of days ago, the executive tweeted, “We entered the buy zone.”
Volume As A Strategy
Trading volume is an important technical indicator for market participants. Investors usually believe that a corresponding drop in price and volume could indicate a price reversal.
A CoinDesk poll on Twitter in 2018 revealed that it was the most favored amongst crypto traders, closely followed by the RSI. One analyst argues that volume is often the metric for the confirmation or rejection of a hypothesis. He went on to state that “Volume is hands down the most important aspect outside of price.”
Volume as a strategy has some inherent faults as experts have noted that volume can be faked through “spoof trading” and some exchanges have come under fire for displaying incorrect volumes.
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