Bitcoin traders have experienced a relatively calm week with an air of caution in terms of price action. This cautious sentiment has not only affected trading activity but has also significantly impacted trading volumes on major cryptocurrency exchanges. Both spot Bitcoin trading and Bitcoin derivatives trading volumes have experienced a considerable decline from their levels at the beginning of the year.
Analysis of on-chain data from CryptoQuant charts reveals a consistent decline in daily spot and derivatives trading volumes of Bitcoin since the first quarter of the year. The decline in volumes has been particularly sharp in recent times, following the high volumes witnessed in March during the Silicon Valley Bank fiasco. The derivatives market has plummeted by 96%, while the spot market has seen a staggering decline of 98%.
In the past week alone, Bitcoin spot trading volume has experienced a significant decrease, as indicated by data from CoinMarketCap. In a 24-hour timeframe, the spot trading volume has dropped by 33.67%. Additionally, CryptoQuant data reveals that the spot exchange trade volume has decreased from 50,692 at the beginning of the week to 9,627, representing an 81% decline.
Derivatives trading volumes have also witnessed a notable downward trend. On-chain data collected by CryptoQuant suggests that the derivatives trade volume at the moment is 108,852, having fallen by 88% from its initial volume of 950,331 at the beginning of the week.
When trading volumes in the cryptocurrency market decline, it indicates a lack of interest from both institutional traders and retail investors. The dwindling activity can have a substantial impact on the future price of Bitcoin and potentially influence the direction of the broader crypto market.
At the current moment, Bitcoin is trading at $26,556. With the decrease in trading activity, the cryptocurrency may continue to trade sideways or potentially face downward pressure. The next significant support level for Bitcoin stands at $25,000, and a dip below this price point could signify an extended bearish trend characterized by increased selling pressure.
Alternatively, the decline in price may present an opportunity for investors to re-enter the market, leading to a resurgence in trading volumes. Some analysts, such as Captain Faibik and Didar Bekbauov, have even suggested the possibility of Bitcoin dropping to $23,000 before rebounding and surpassing the year-to-date price to reach $34,500 in early 2022. However, it’s crucial to note that this article does not provide investment advice, and investing in cryptocurrencies always carries risk.
The decline in trading volumes for Bitcoin raises concerns about the future direction of the cryptocurrency. The lack of interest from institutional and retail traders is a significant factor to consider. While the lower prices may attract buyers, leading to a potential resurgence in volumes, the market remains uncertain. Investors should exercise caution and conduct thorough research before making any investment decisions in the cryptocurrency space.