Crypto Trading Volumes Down 50%, are Prices Peaking?
The average daily trading volumes of leading cryptocurrencies are down by about 50 percent in two weeks, statistics reveal. This, some analysts believe, marks the end of what has been a solid performance over the last few months. Then, Bitcoin, ETH, and leading DeFi tokens not only registered record-breaking volumes but soared above their previous highs at the back of increasing interest from high net-worth investors channeling billions into the digital gold.
Trading volumes are a mark of participation. Without traders, the asset becomes illiquid, fractious, and with unattractive volatility. The bad news is that crypto trading volumes are dropping despite digital assets drawing the attention of deep-pocketed investors who have been doubling down, acquiring Bitcoin, ETH, and other utility coins. The rapid expansion of prices in Q4 2020, for instance, was pinned to institutions. As we advance, the performance of Bitcoin and how it will close above $42k, breaking above 2021 highs, largely depends on the level of investment from institutions. Their refrain, analysts say, explains why crypto remains range-bound with Bitcoin specifically kept close to $30k despite the across-the-board optimism from retailers.
Impact on Crypto and BTC prices:
Neutral to Bearish. Most liquid cryptos are trading at around 2021 highs. Although trading volumes have nearly halved, on-chain statistics point to a firmer uptrend, especially in Bitcoin. There appears to be a wave of accumulation, unlike 2017 peaks when market participants, largely driven by retailers, were liquidating their holdings while institutions--through cash-settled Bitcoin futures, were betting against the uptrend.
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