By Nicolas Abington | Crescent City Capital Market Analyst Intern
Bitcoin’s average monthly volume has reached a surprising low in the past month as its daily volume has sunk to two-year lows. As you can see by the graphs in Exhibits 1 and 2, Bitcoin volume has been on a decline this past month involving some of the most traded on exchanges in the crypto space especially within the last one to two weeks. This could be due to a number of reasons (Binance exclusion from the graph, expected recession, rate cuts by the US Fed, etc.), but what is more important to note is the role that volume plays in technical analysis for traders. According to an article by Sebastian Sinclair from Coindesk, expert chartists use volume as an indicator to confirm/reject given hypothesis and trend analysis. For example, let’s say that volume is becoming increasingly low while the price is rising this would signal a bearish signal to traders as people are less interested in trading at these higher prices. With that said, Bitcoin is experiencing a two year low in conjunction with a slight decrease in price which is an indicator of exhaustion and that a reversal will happen soon. While nothing is definite in the crypto world, it’s apart of due diligence to watch our indicators and watch how well they show reality so that we can continue to be more effective traders.
“Why Traders Say Volume Is Crypto Price Indicator of Choice”-Sebastian Sinclair-12/23/2018