It’s been a quiet week of caution for Bitcoin traders on the price action front. This caution has particularly trickled down to trading volume, as volumes on the major crypto exchanges for both spot Bitcoin trading and Bitcoin derivatives have fallen well below their levels at the start of the year.
On-chain data from CryptoQuant Charts show that Bitcoin’s daily spot and derivatives trading volume has steadily declined since the first quarter of the year. The question is: what does this collapse in trading volumes mean for the future price of Bitcoin?
Decrease in trading volumes
Trading volumes are down significantly this year from their highs in March during the Silicon Valley Bank fiasco. Since this period, the derivatives or futures market has fallen by 96% and the spot market by 98%.
Bitcoin trading in particular has fallen by a significant margin over the past week. Data from CoinMarketCap has shown that Bitcoin spot trading volume has declined by 33.67% in a 24-hour period. Similarly, CryptoQuant data showed that trading volume on the spot exchange stood at 9,627, down 81% from 50,692 at the start of the week.
The situation looks even more dire when you also consider declining derivatives volumes. On-chain data collected by CryptoQuant shows that derivatives trading volume currently stands at 108,852. This represents an 88% decline from the volume of 950,331 at the start of the week.
The market cap of cryptocurrencies is currently at $1.03 trillion. Chart: TradingView.com
What does this mean for the price of Bitcoin?
When activity in these markets decreases, it indicates a lack of interest from institutional traders and retail investors. With interest seemingly waning, the coming weeks could determine Bitcoin’s near-term price. As the largest cryptocurrency in the world, this could also determine the direction of most of the crypto market.
At the time of writing, Bitcoin is trading at $26,556. Without much trading activity to push prices higher, Bitcoin could continue to trade sideways or even experience downward pressure. The next major support for Bitcoin is at $25,000, and a drop below this price could indicate a long-term bearish trend with increased selling pressure.
Another way this could happen is that the lower price eventually leads to higher volumes as investors see an opportunity to buy. This is evident from a message on social media According to crypto analyst Captain Faibik, Bitcoin could hit a low of $23,000 in October before breaking out to $34,500 early next year.
Similarly, Didar Bekbauov, founder and CEO of the joint Bitcoin mining company Xive, stated that the price of Bitcoin could rise beyond the year to date (YTD) price of $31,700 during a conversation with Bitcoinist.
(The content of this site should not be construed as investment advice. Investing involves risks. When you invest, your capital is subject to risk).
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