Why Trading Volumes are Important in Cryptocurrency
Market forces of supply and demand shape price action in any open market. Prices will fluctuate as long as there are market participants.
In periods of optimism, you'd expect crypto prices to rise and rally in FOMO. At other times, the tide can change.
As traders scamper for safety, prices would likely drop as participants dump for cash—or other stablecoins.
Therefore, the natural question is: What will be the appropriate measure to time entries and exits if indeed crypto is shaped by market forces?
There are various indicators, but the one that truly reflects the state of the crypto market are volumes.
Trading volumes are, as the name means, gauge the level of participation. In a cryptocurrency exchange, they will indicate the number of long and short positions of contracts being traded at any given time.
The more there are more buy contracts than sellers, BTC prices will expectedly rally.
Surging interest would also force on-chain activity higher as traders create new addresses to deposit or withdraw coins. The higher there are trading volumes, the more liquid the asset is. Out of this, a client-facing CFD crypto exchange will also present the lowest spreads and permit higher leverage.
Therefore, any savvy trader would want to keep tabs on trading volumes as a primary indicator that sways trend momentum.
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