- A lot of new and old investors have portfolios with one or the other cryptocurrency. The multi-utility nature and decentralized mechanism are what drives volumes in crypto markets.
- China hosts 50% to 60% of the world's crypto mining power. Recent crypto halts and regulations in China are a significant reason for the crypto market's downfall.
- Even amongst falling volumes in the market, specific cryptocurrencies like Ethereum and Tether attract investors' attention.
When cryptocurrencies were at peak levels, many new and old investors pumped in funds into them. As a result, experiments like trading art pieces and Zed runs, or digital horse races have been quite popular this year. But, now cryptocurrency trading volumes are falling, and half of the market is gone. According to crypto researchers, in June, cryptocurrency exchanges have witnessed a beyond 40% fall in trading volumes. Spot trading volumes fell about 42%, while derivative volumes were down around 40.7%.
Why are Cryptos going down?
China’s crypto halt
China recently ordered a halt to cryptocurrency mining and trading. It is preparing to launch its state-backed digital currency. As a result, mining operations have stopped across various provinces, which earlier hosted 50% to 60% of crypto mining power. Its crypto regulatory steps have resulted in lower prices and volatility caused by decreasing spot volumes. Bitcoin fell more than 6% last month; it had tumbled 35% in May.
Environmental, social, and governance (ESG) concerns
Cryptocurrencies do have negative ESG credentials. According to researchers, most Bitcoin miners are based in China, which heavily relies on coal for energy. There have been tensions between national ESG agendas and environmental concerns regarding digital assets. In addition, negative regulatory undertones from intergovernmental anti-money laundering bodies have dragged down crypto markets even further.
How is the volume defined for a Cryptocurrency?
The amount of trade defines the volume for a given cryptocurrency throughout a particular period. It can be measured in both quote currency and base currency by traders.
A 24-hour change is computed using the current price of a cryptocurrency in a chosen base currency. It is then compared with the price of the cryptocurrency registered 24 hours ago.
A common misconception regarding trading volume is caused by the colour of the bar depicting it. For example, many people think that a red bar shows sell volume, while green bar shows buy. However, the colour is just a reflection of the closing direction of the Crypto's price candle. It does not determine the direction of the trading volume. Therefore, volume is just the amount of traded assets.
The volume of an asset is an indicator of its popularity among traders. The top cryptocurrency by volumes keeps changing. Market participants tend to move amongst them based on price, volatility, inflation, and other factors.
Which cryptocurrency has the highest volume?
Since top cryptocurrencies keep changing daily, the Crypto with the highest volume is also different each day. Based on data of 12 July 2021, the Top 5 cryptocurrency volumes were seen in the following-
Data Source: Coinmarketcap.com, Image Source: Copyright © 2021 Kalkine Media
Cryptos like Bitcoin, Ehtereum, and Binance coin are very popular amongst traders. All of them have billion-dollar market capitalizations. Investors use them for trading, payment processing, and even Crypto horse racing. The multi-utility nature and decentralized mechanism are what drives volumes in crypto markets.
Why is volume essential for cryptocurrency?
Cryptocurrency exchanges like Pancakeswap, Uniswap, etc., need trading volumes to keep running. Volume is what brings money for the popular exchanges. Many of them collect a transaction fee on trades executed on their platform. The charge is usually a percentage of the total value traded. Without volumes, exchanges may become non-profitable or even loss-making business ventures.
Volume is equally essential for cryptocurrency investors. As official exchanges provide a community of buyers and sellers, investors and traders find liquidity. A larger volume of buyers and sellers pulls the price towards equilibrium.
As a result, the possibility of slow and/or inefficient trades is reduced. Furthermore, when demand works in the sellers' favour and it bags a more favourable selling price. More volumes thus allow quicker and better price determination.
Higher volumes also allow easier inter-conversion amongst different cryptocurrencies. It is easy to navigate amongst a multitude of diverse pairings trading at significant volumes. Therefore, volume most certainly does matter.