Diminishing Enthusiasm Pushes Crypto-wide Trading Volume Down After Feb. 27

A market intelligence platform has attributed the drop in crypto-wide trading volume since Feb. 27 to a combination of “exhaustion, hopelessness and capitulation.”

Crypto-market intelligence platform Santiment has attributed the drop in crypto-wide trading volume since February 27 to “exhaustion, hopelessness, and capitulation.” According to the firm, this may be an "early warning sign of weakening market momentum."

As of Monday, March 11, the total market capitalization was around $2.65 trillion, with a trading volume of nearly $164 billion, as per CoinGecko. Some 24 hours later, the market recovered, adding over $100 billion, but the trading volume remained flat. At press time (March 13, 1:30 p.m. EST), the market capitalization was a little less than $2.8 trillion, while the trading volume was $122.6 billion. This, according to Santiment, might mean that "fewer traders are convinced that buying at current levels will yield profitable outcomes."

After hitting a new all-time high of over $109,000 on January 8, bitcoin (BTC) has largely trended downward. The market also went through a sustained rally following Donald Trump’s confirmation as the winner of the U.S. presidential election in November 2020, which might have also exhausted traders.

Some have attributed the decline to ongoing trade war fears. However, according to Santiment, a consistent decrease in the trading volume of major cryptocurrencies, even during slight price recoveries, may be an early warning sign of diminishing trader enthusiasm.

“Shrinking volume during minor rebounds isn’t necessarily a direct bearish signal, but volume is a metric that measures participation from both retail and institutional traders. If both groups are waiting for the other to boost market caps in order to make their next moves, it can lead to price stagnancy with little movement (and a slight tendency to veer toward the downside). A simultaneous increase in both price and trading volume is usually an ideal scenario for a strong and sustainable recovery,” the firm explained on X.

Generally, a substantial increase in trading volume accompanies a change in price trends. However, in the absence of such an increase, despite the minor price movements, a cautious market outlook is likely to persist.