The crypto market is currently experiencing a significant downturn as trading volume has declined by over 50% since its peak in February. This drop signals increasing trader exhaustion and potentially weakening market momentum, according to market analysts.
In February, the daily trading volume reached a staggering $440 billion, yet it has plunged to just $163 billion by March 12, marking a 63% decrease as indicated by data from CoinGecko. CoinMarketCap corroborates this trend with a reported 52% drop, showing that as enthusiasm wanes, so too does participation in crypto transactions.
Analytics firm Santiment highlights that this decline in trading volume suggests a staggering decrease in trader enthusiasm. They argue, “When trading volume for major cryptocurrencies consistently drops, even during slight price recoveries, it typically points toward diminishing trader enthusiasm.” Signs of exhaustion, hopelessness, and capitulation among traders are becoming increasingly apparent.
The total market capitalization has faced severe declines, shrinking by approximately $900 billion, or nearly 25%, since February. Just in the last ten days, markets have experienced a further 15% loss, largely fueled by fears of a recession and growing global trade tensions.
Traders are now displaying caution as uncertainty prevails. Santiment concludes that reduced trading activity is a reflection of this uncertainty, stating, “fewer traders are convinced that buying at current levels will yield profitable outcomes.” Weakening trading volume amidst minor price bounces serves as an early warning signal of deteriorating market momentum.
- The current situation poses the risk of price gains losing momentum due to insufficient support.
- Minor rebounds in price might be temporary, making the market vulnerable to further downturns.
However, not all analysts view this decrease in volume as a direct bearish signal. It is essential for volume to rise before any significant price rebound can be sustained. To indicate a more stable recovery, both rising prices and volumes should be seen. The market capitalization is now around $2.8 trillion, reminiscent of its status a year ago before a lengthy period of consolidation.
As the Crypto Fear & Greed Index remains in the “fear” zone, below 50 since February 21, the overall sentiment remains bearish. The question of when and how the market will recover hangs in the air as traders and investors remain cautious in the face of declining volumes.
In conclusion, the crypto landscape faces numerous challenges as trading volume decreases and uncertainty grips the market. Investors must tread carefully, acknowledging these warning signals as they navigate the tumultuous waters of cryptocurrency investment.
