The key role of the commercial volume when analyzing the cryptocurrency market
The cryptocurrency market has become increasingly popular and unstable in the past ten years. Thanks to a variety of cryptocurrencies, from recognized players such as Bitcoin to newer participants such as Dotecoin, retailers face many challenges if they try to predict market trends. One of the key factors that play an important role in the assessment of market trends is the trading volume.
In this article, we will deal with the importance of the trading volume for the analysis of the cryptocurrency market and examine why investors and dealers are required for investment decisions.
What is a trading volume?
The sales volume refers to the total amount of the current money for a certain pair of currencies or assets in one day. Offers valuable insights into market moods, liquidity and price movements. The high trade volume shows a high demand for a certain cryptocurrency or a fortune, which indicates that buyers are happy to enter the market.
Why is the trading volume important for the analysis of the cryptocurrency market?
- Market moods : The trading volume can result in changes to the investor moods to a certain cryptocurrency or a certain assets. Since more and more retailers buy or sell assets, the price can rise or fall. And vice versa, the turning volume reduces bears.
- Liquidity : The high trading volume ensures sufficient liquidity for buyers and sellers in order to exchange assets at the applicable market prices. Low commercial volumes can indicate a lack of liquidity, which makes it difficult to introduce or leave the transaction.
- Discover prices
: Commercial volume helps dealers and investors understand how much asset prices change in response to new information such as information expenditure, regulatory ads or global economic events.
- Prediction : Analysis of the trends of the trade volume can identify the potential reversal of the market and predict future price movements.
How to interpret the rotation volume
- High volume : The high rotation volume indicates a strong demand for a asset, which is often accompanied by a significant price movement. This is a stubborn signal that indicates that retailers willingly buy or enter the market.
- Low volume : Low trading volume can display bears because fewer buyers are involved in the market. This is a negative signal that indicates that retailers can wait for the prices to be withdrawn before entering the market.
- Trends of volume : Analyze the trend of the commercial volume to identify patterns and correlations with price movements. For example, if the volume of assets increases within a few days or weeks, this can indicate increased demand.
Examples of a real world
- Bitcoin (BTC) Rotary Volume : In 2017, Bitcoin recorded after the rally of the commercial volume, which reached around 60,000 USD per coin.
- Ethereum (ETH) trade volume : During the correction of the market in April 2020, the commercial volume of Ethereum fell to around $ 40,000, which caused many analysts to convince that assets should reverse prices.
- XRP volume (XRP) : 2018 the XRP trade volume rose rapidly in response to news about the partnership with R3 and the start of the SPAC connection.
Application
The trading volume is an important element of the market analysis of the cryptocurrency and ensures valuable insights into market moods, liquidity and price movements. The understanding and interpretation of the trends of the commercial volume and dealers can better move in the complex world of cryptocurrency markets and make well -founded decisions about their investments.
Since we are still experiencing the growing party and the use of cryptocurrencies in various industries, it is important that retailers and investors adapt their reaction strategies itself.
