According to Santiment, a market intelligence platform, the drop in crypto-wide trading volume since Feb. 27 can be attributed to a combination of “exhaustion, hopelessness and capitulation.” Santiment adds the consistent decline in the trading volume of major cryptocurrencies, even during slight price recoveries, indicates “diminishing trader enthusiasm.”
In a post on X explaining this trend, the market intelligence platform asserts that such investor behavior means traders are not convinced by the temporary upward movement. As shown by CoinGecko data, the total market capitalization on March 11 fell to approximately $2.65 trillion, with trading volume of almost $164 billion.
However, some 24 hours later, the market recovered, adding over $100 billion, but trading volume remained flat. At the time of writing (March 13, 1:30 p.m. EST), the market capitalization was just under $2.8 trillion, while the trading volume stood at $122.6 billion. This, according to Santiment, may indicate that “fewer traders are convinced that buying at current levels will yield profitable outcomes.”
After seeing a sustained rally that followed Donald Trump’s confirmation as the winner of the U.S. presidential election, the crypto market has largely trended downward since Jan. 20. On that day bitcoin (BTC) surpassed the $109,000 mark to set a new all time high. While some have attributed the decline to ongoing trade war fears, Santiment argues that a weakening trading volume amid mild price bounces may be “an early warning sign of weakening market momentum.” The market intelligence platform adds:
Shrinking volume during minor rebounds isn’t necessarily a direct bearish signal, but volume is a metric that measures participation from both retail and institutional traders. If both groups are waiting for the other to boost market caps in order to make their next moves, it can lead to price stagnancy with little movement (and a slight tendency to veer toward the downside).
According to Santiment, a simultaneous increase in both price and trading volume is generally considered a signal of a robust and sustainable market recovery. However, in the absence of a meaningful increase in trading activity, a cautious market outlook is likely to prevail.
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