Bitcoin has been experiencing a significant dip in trading volume lately, reaching its lowest point in almost five years.
An in-depth analysis of data provided by CryptoQuant, encompassing both spot and derivatives exchanges, reveals that the collective volume of Bitcoin traded across all exchanges plummeted earlier this month to a level not seen since November 10, 2018. This decline has been a consistent trend, with a struggle to regain momentum in subsequent days.
As of August 26, the total trading volume of Bitcoin across all exchanges registered at 129,307 BTC. Earlier this month, the total number was even lower at 112,317 BTC. Compared to the peak volume of 3.5 million BTC recorded in March, this was a drop of approximately 94 percent.
Julio Moreno, the head of research at CryptoQuant, offers insights into this phenomenon, saying, “Trading volumes decrease in bear markets as retail investors leave. This happened during 2022 on most exchanges.”
However, Moreno also anticipates that trading volumes may regain momentum as the market progresses into a bullish phase.
In terms of price performance, the cryptocurrency still exhibits a 57 percent year-to-date increase and maintains a value hovering around $26,100, as reported by Coin Metrics.
Effects of recent crackdowns
The regulatory scrutiny surrounding cryptocurrencies in the United States, coupled with the resolution of the banking crisis in May, which was a driving force behind the notable gains of the year, has prompted market makers and traders to adopt a cautious stance. This retreat from the market has persisted, lacking compelling reasons for them to return and engage actively.
Even a significant sell-off event on August 17, reminiscent of the November FTX fallout, did little to break the overall trend. The data indicate that long-term investors have displayed resilience against the recent market weakness, indicating a certain degree of stability among this category of participants.
Despite the apparent stagnation, some experts hold a cautiously optimistic view. Gautam Chhugani, an analyst at Bernstein, described the recent crypto trading week as lacking fervor due to the absence of new catalysts.
However, he underlined that the market was not necessarily bearish. Instead, participants were awaiting developments that could catalyze renewed activity. Specifically, all eyes are on the Securities and Exchange Commission (SEC) for decisions related to spot Bitcoin ETF applications.
Chhugani suggested that the true opportunity for investors lies in maintaining a firm approach through the market’s ups and downs, particularly given the historical patterns associated with Bitcoin halvings.
The next halving is expected to occur in the spring of 2024, which could potentially usher in a new phase of the market cycle. This perspective is seconded by Cantor Fitzgerald analyst Josh Siegler, who underlined the significance of long-term crypto adoption and Bitcoin’s enduring value proposition.
“Although near-term catalysts may take many forms, we continue to believe in the long-term story of ongoing crypto adoption and Bitcoin’s staying power as an alternative asset and store of value,” Cantor Fitzgerald analyst Josh Siegler said in a note Monday.
At the time of writing, Bitcoin’s price hovers just above $26,000.