Analysis, Bitcoin, Price Watch

Bitcoin Volume Hits Yearly Low, What Impact Will it Have on Crypto Market?

Bitcoin Volume Hits Yearly Low, What Impact Will it Have on Crypto Market?

In the past several days, the daily trading volume of Bitcoin has declined by more than 23 percent to its lowest point in 2018.

Edward Morra, a respected technical analyst in the cryptocurrency sector, said:

‘This is the lowest recorded daily volume in more than a year at least (as much as I could squeeze on the chart leaving chart readable) while hovering around the POC of the whole 2018.”

On CoinMarketCap, the volume of Bitcoin dropped around 23 percent from $4.2 billion to $3.2 billion. On CoinCap.io, the official cryptocurrency market data provider of ShapeShift, which filters out exchanges suspected of having inflated volumes, the volume of Bitcoin dropped from $2.6 billion to $2 billion, by the same margin as CoinMarketCap.

Why is Volume Declining?

The daily trading volume of Bitcoin has declined substantially throughout this week because traders are unsure whether Bitcoin will decline below the $6,000 support level or break out of the $6,800 resistance level.

Investors in the cryptocurrency exchange market are waiting for Bitcoin to initiate a large breakout of a major resistance level in the higher region of $6,000.

Since Aug. 9, Bitcoin has remained relatively stable in the range of $6,400 to $6,800, and traders are unwilling to take unnecessary risks to bet on a market that could either downtrend to the lower region of $6,000 or potentially initiate a rally in the north of $6,000.

Entering a short or a long position on any major cryptocurrency in the current state of the market is a high risk, low return trade. Hence, as portrayed by the decline in activity in the cryptocurrency exchange market, traders are merely observing the market to initiate a major movement.

It is possible that the volume of Bitcoin has dropped due to the elimination of intensity in the market and rising seller fatigue. Bears in the market have struggled to bring Bitcoin below the $6,000 support level since July 6.

Yet, an influx of positive developments in the cryptocurrency sector including the entrance of Citigroup, Morgan Stanley, Goldman Sachs, TD Ameritrade, Yale University, Bakkt, and ICE/NYSE into the cryptocurrency market have given bulls leverage.

As Don Alt, a cryptocurrency trader said:

Investors are Observing $6,800

Until Bitcoin breaks out of a major resistance level at $6,800, it is unlikely for the dominant cryptocurrency to record any sort of meaningful increase in both volume and price.

Billionaire investor Mike Novogratz, who previously said that Bitcoin will likely surpass the $10,000 mark by the end of 2018, said:

“$6,850 is the level that matters in BTC. Take it out and we will see a real move.”

Historically, prior to a large short-term rally, BTC has tended to demonstrate a drop in volume. On July 18 for instance, the volume of BTC experienced an abrupt spike as BTC surged from $6,500 to $7,500 within hours.

The possibility of bitcoin experiencing a sudden surge in volume and value cannot be dismissed given its previous rallies throughout this year. But, in the upcoming days, unless the entire crypto market sees a general increase in activity, it is likely that the market will continue to demonstrate stability in a low price range.

Bitcoin | BTC

Updated: October 8, 2018 at 3:17 am PDT
$6,581.25 | 0.19%

Bitcoin, currently ranked #1 by market cap, is up 0.19% over the past 24 hours. BTC has a market cap of $113.93B with a 24 hour volume of $3.34B.

Chart by CryptoCompare

Bitcoin is up 0.19% over the past 24 hours.

Cover Photo by Jeremy Bishop on Unsplash

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Joseph Young

Joseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.

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