Understanding Cryptocurrency Trading Volume

Along with circulating supply and market capitalization, volume is one of the most prominent metrics in crypto. Let’s breakdown what volume is, and how it can show us a coin’s direction.


Along with circulating supply and market capitalization, volume is one of the most prominent metrics in crypto. Within our premium, members-only Coinist Insiders Network, our job is to identify early stage cryptocurrencies with a high probability for success before there is any retail hype around them. We look at a coin’s trading volume before we decide to shortlist a project for further analysis. Below we’ll break down why trading volume is such an important metric when analyzing cryptos and how it can help you show a coin’s direction.

The volume of a token listed on CoinMarketCap is quite simple. It’s the amount of the coin that has been traded in the last 24 hours. For example, roughly $3.5 billion worth of Bitcoin has changed hands in the last day. You can break this down in a variety of ways; you could also list it as 3,039,787,668 Euros. Or, in crypto terms, 642,566 Bitcoins. You can also slice and dice it by exchange. In the last 24 hours, roughly 14.97% of all Bitcoin traded moved through Bitfinex, where the price is $5514 as of writing. Essentially, volume underscores how many people are buying and selling the coin. If the price of Bitcoin goes up and it shows a hefty volume, that tells us lots of people are making moves. Thus, it will likely keep going up. If the price of Bitcoin drops, but there’s minimal volume, that could tell us only a small amount of people back the trend. Let’s go into more detail on the ramifications.

Volume is arguably the most important metric for a cryptocurrency, because of the amount of ways it can be broken down. From volume, you can infer the direction and movements of a coin. It’s an essential metric for traders. Volume can examined in minute detail. You can track volume on CoinMarketCap by the last 24 hours, last week, or last 30 days. This helps reveal if a coin’s recent swings are an aberration or the norm. A coin with frequent heavy movements won’t attract attention if it has high volume. If a coin normally has less volume, heavy trading in the last 24 hours could indicate there’s some support behind the move it may be making.

You can also examine which exchanges had what volume. This matters because exchanges frequently have different prices. As well, many exchanges are geographically-focused. Kraken, for instance, is largely a European exchange. OKCoin functioned in China until the People’s Bank of China cracked down recently. Volume by exchange can reveal where the buyers or sellers of a coin are. CoinMarketCap does not, however, reflect exchanges with no fees. Exchanges that don’t charge a fee allow traders and bots to send coins back and forth for free, imitating a high volume.

Generally, the biggest and most popular coins are traded the most. If you sort by volume on CoinMarketCap, the top three coins are Bitcoin, Etherum, and Ripple, also the three largest market caps. No surprises there. But if you slide down a bit, you’ll see MonaCoin, a lesser-known currency, having higher trading volume than big names like Neo and Dash. MonaCoin isn’t much talked about, but it’s seen a remarkable 86.97% change in the last 24 hours. Coupled with a high trading volume, that’ll attract plenty of attention.

Comparatively, if we sort by lowest 24 hour trading volume in the top 100, Dentacoin pops up. It’s seen a 26.25% increase in the last 24 hours. That looks great on paper. But the low volume could make investors cautious. It might mean that the move won’t last, and that Dentacoin could soon see a correction. Of course, there’s no way to know for certain. Comparing the 1 day volume to the 7 day volume is another way we can read trends. Around $3.6 billion of Bitcoin was traded in the last 24 hours. Around $12.3 billion Bitcoin moved total in the last seven days. Almost a quarter of Bitcoin’s 7 day volume occurred yesterday. This tells us that yesterday was a massive trading day, which isn’t likely to repeat. On the other hand, you truly never know in crypto.

Cryptocurrencies are so different from established securities that there’s limited usefulness in comparing metrics. Since tokens don’t produce financial statements, they have relatively few metrics to start with. But we’ll compare cryptocurrency trading volumes to provide a sense of scale. In the last 24 hours, around $3.6 billion of Bitcoin was traded, as the price hit all-time highs. Comparatively, around $1.3 billion of Ethereum was traded. There’s quite a drop-off from there to Ripple, which saw $410 million change hands. But cryptocurrencies are already vastly more traded than conventional stocks. Apple trades roughly $4 billion a day in volume. For now, that remains ahead of the largest cryptocurrencies, but Bitcoin’s volume is knocking on the door. The higher trading volume of cryptocurrencies is one reason they fluctuate so drastically.

For traders, volume hints at sustainability of a given move. A drastic price increase with low volume might be fool’s gold. A drop with considerable volume behind it might mean a coin is in for an extended bear run. There are no certainties in cryptocurrency. But effectively assessing volume is an important tool in an investor’s belt.

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