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The trading volume of Bitcoin has reached its lowest point in the past four years, suggesting that investors are waiting for a compelling reason to re-enter the market.
An analysis of CryptoQuant data reveals that both spot and derivatives exchanges have experienced a decline in the total volume of Bitcoin held, reaching its lowest level since 2019 and showing signs of struggle to recover.
According to CryptoQuant, as of August 26, the trading volume of Bitcoin on all exchanges was recorded at 129,307 BTC, the lowest figure since March 31, 2019. This represents a significant drop of about 94% from the peak of 3.5 million BTC in March of this year.
“Trading volumes decrease during bear markets as retail investors exit,” explained Julio Moreno, head of research at CryptoQuant, in an interview with CNBC. “This trend was observed across most exchanges in 2022. As we progress further into a bull market, trading volumes may start to pick up.”
Despite the current decline in trading volume, the price of Bitcoin has still recorded a year-to-date increase of 57% and is currently hovering around $26,100, according to Coin Metrics.
The lack of activity in the Bitcoin market can be attributed to various factors, including the regulatory crackdown on cryptocurrencies in the United States and the resolution of the banking crisis in May, which accounted for a significant portion of its gains for the year. As a result, market makers and traders have been hesitant to return without a compelling reason.
Even after the recent sharp sell-off on August 17, which was the largest one-day decline since the FTX fallout in November, the market quickly returned to a state of calm. Long-term investors have shown resilience and have not been easily shaken by the recent weakness.
Gautam Chhugani, an analyst at Bernstein, commented on the lack of activity in the market, stating that “the overall market remained dull waiting for a new catalyst, and market liquidity remained scarce.” He also highlighted the market’s disinterest in trading, as participants eagerly await catalysts, specifically decisions on spot Bitcoin ETF applications at the Securities and Exchange Commission.
Chhugani emphasized that investors’ true opportunity lies in staying committed throughout the new market cycle, which traditionally aligns with the Bitcoin halving. The next halving event is expected to occur in the spring of 2024. Cantor Fitzgerald echoed this sentiment, reaffirming their belief in the long-term adoption of cryptocurrencies and Bitcoin’s status as an alternative asset and store of value.
Contributing reporter: Michael Bloom (CNBC)
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