Trading Volume

How much is actually being traded?

Trading volume provides insight into the activity and interest around a crypto currency. Learn how volume analysis can be used to identify strong trends and make better decisions.

What is trading volume and how does it work in the crypto market?

Trading volume is an important indicator that shows how much a given asset, such as a cryptocurrency, is traded within a specific period. In simple terms, it measures how often a coin like Bitcoin or Ethereum changes hands within a given time frame. This volume can be measured on various time scales, such as hourly, daily, or monthly.

How does trading volume work?

Trading volume gives insight into the activity and interest in a particular cryptocurrency. High trading volume means there is a lot of activity: many people are buying and selling. This can suggest strong interest in the asset or that significant price movements are taking place. Low trading volume, on the other hand, means there is less interest, or that the price remains relatively stable because not much trading is occurring.

Trading volume in the crypto market

In the world of crypto, where markets are open 24/7 and often experience large price fluctuations, trading volume is a useful measure of the strength of a trend. Imagine the price of Bitcoin is rapidly rising. If this comes with high trading volume, it may indicate that the price increase is legitimate and supported by strong buying interest. If the price rises but volume is low, this may mean the rise is not sustainable and could quickly reverse.

How to use trading volume in crypto?

Trading volume can be used to confirm confidence in a trend. Traders often look at volume to determine whether a price movement is strong or weak. If a coin rises with high volume, traders often view this as a reliable signal that the price may continue to rise. Conversely, if a coin falls with high volume, it may indicate that the downward trend is strong and likely to continue.

A popular strategy is to combine trading volume with other indicators, such as price movements and technical analyses like the RSI. This can help make better decisions about when to buy or sell.

Daily percentage change in trading volume

Another useful concept when analyzing trading volume is the daily percentage change. For example, if volume is 30% higher one day than the day before, this means significantly more trading activity is occurring. This can indicate an important event — such as news about regulation, partnerships, or large investors entering or exiting. An increase in volume without a significant price change may also mean the market is becoming more volatile and larger price swings could follow.

On the other hand, if trading volume suddenly drops (e.g., down by 20%), it may mean interest in that coin is declining. This can be a sign that traders are waiting on the sidelines or that fewer strong price movements are expected.

Risk and interpretation of trading volume

High trading volume can be either positive or negative, depending on market direction. A strong price increase with high volume can be bullish, while a strong decline with high volume can be a bearish signal. Conversely, low volume can mean less interest or uncertainty in the market, potentially leading to unpredictable price changes.

In short, trading volume provides insight into the strength of price movements and can help make better trading decisions in the volatile crypto market.
High: > €100 billion
Average: €50 to €100 billion
Low: < €50 billion