The data shows that Bitcoin trade volume is starting to drop, which suggests that the current downtrend may be decreasing.
Recent Week: Bitcoin Trade Volume Drops Sharply
According to the most recent weekly report by Arcane Research the BTC average 7-day trading volume has been significantly decreased.
The “trading volume” is an indicator that measures the total amount of Bitcoin transacted on the chain during a particular period.
This metric is used to indicate that the amount of activity on the chain has fallen. Investors may not be interested in BTC trading right now, as there are fewer movements on the chain.
This may reflect investors’ belief that Bitcoin will soon rise in price. And hence they don’t want to move their Bitcoin at the current levels. But it could also indicate disinterest.
The other side is that a higher trading volume means that more holders will be shifting coins. This type of trend makes it easy to create big price swings. You need traders to support such movements.
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In the past, there have been instances where the price of Bitcoin seemed to be sharply moving towards a direction, but the chain data didn’t show any corresponding trading activity. These moves tend to end after a while. The volume remained low even after Bitcoin reached an all-time record (ATH), for example.
Here’s a chart showing the change in volume of BTC trades over the last year.
This indicates that the indicator's current value is at risk. Source: Arcane Research Weekly Report - Week 49| Source: The Arcane Research Weekly Update - Week 49
This graph illustrates that Bitcoin’s trading volume increased dramatically in January due to the Dec 4th crash. However, in the past week, the indicator’s value has dropped off by almost 40% as the market calms down.
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The trading volume appears to have slowed to around $5 billion since August. However, there were occasional spikes of $10 billion in high-volatility periods.
The trading volume calming down can mean Bitcoin’s recent downtrend might be starting to diminish. High values of this indicator, which have been explained above, are required to maintain such movements.
At the time of writing, Bitcoin’s price floats around $47.7k, down 3% in the last seven days. Below is a chart showing the change in Bitcoin’s price over the last five days.
BTC price continues to fall in recent days. Source: BTCUSD tradingview| Source: BTCUSD on TradingView
Unsplash.com featured image, Charts from TradingView.com and Arcane Research charts