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Bitcoin Trading Volume Sees Significant Increase in Q1, But Decline in USD Pair Volume Raises Concerns

Bitcoin trading volume saw a significant increase in the first quarter of 2023, but surprisingly, Bitcoin/US Dollar (USD) trading volume decreased, according to a report by crypto market data provider Kaiko. The report found that the growth in Bitcoin trading volume was mainly driven by the Bitcoin/USDT and Bitcoin/BUSD trading pairs.

However, the decline in Bitcoin/USD trading volume hit its lowest level since 2020. Kaiko analyst Clara Medley noted that Bitcoin/USD trading volume is a more accurate way to measure actual Bitcoin trading volume, excluding the effect of Binance’s Bitcoin trading fee waiver in Q1.

Source: Kaiko

Medley said that the majority of Bitcoin trading volume over the past year has been related to Binance’s zero-fee policy, and since the zero-fee ban, Bitcoin daily trading volume has plummeted. This is a cause for concern, as price movements can be exaggerated in low volume situations.

Retail investors have been leaving the cryptocurrency market in droves since last year, and this trend has been continuing in 2023. A recent study by K33 and EY Norway found that retail investor activity has weakened globally, with visits to global cryptocurrency exchanges dropping by 25% since last summer. The number of website visits related to cryptocurrencies also decreased significantly compared to last summer.

Noel Acheson, author of the ‘Crypto Is Macro Now’ newsletter, said that crypto derivatives activity is on the rise, but so-called spot or cash markets are not. She also noted that there is a lot of uncertainty in the market, which suggests that interest in cryptocurrencies right now is focused on a more complex segment of the market, and that traditional macro investors and retail players are remaining on the wait-and-see approach.

In conclusion, the decline in Bitcoin/USD trading volume is a cause for concern, and it remains to be seen how the cryptocurrency market will evolve in the coming months. The trend of retail investors leaving the market is worrying, and it could have a significant impact on the market’s liquidity and stability.

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