The Trading Volume of Cryptocurrencies Has Hit a Four-year Low!
Crypto Trading Volume Hits 4-Year Low: As a result of the volatile and speculative nature of digital assets, traders appear to be losing interest in the cryptocurrency market, which has resulted in a lengthy period of low activity on the market.
CCData, a provider of data and indexes for digital assets, stated in research that the volume of the cryptocurrency spot market reached its lowest level since March 2019 in the month of August, while the derivatives market also showed a large fall in volume and open interest over the same time period.
Centralized exchange and derivatives market activity falling: August Study Insights
According to the findings of the study, the volume of spot trades conducted on centralized exchanges fell by 7.78% in August, reaching its lowest level in more than four years at $475 billion.
The term “spot trading volume” refers to the total amount of tokens that were traded from one person to another during a given time frame.
Additionally, the volume of trades on the derivatives market, which includes futures, options, and swaps, dropped by 12% to $1.62 trillion, marking the market’s second-lowest level since 2021. The percentage of the entire cryptocurrency market activity that is accounted for by derivatives fell for the third month in a row, reaching 77.3%.
The Report’s Reasons for Declining Crypto Trading
According to the survey, the low level of trading activity can be ascribed to the absence of volatility and catalysts in the cryptocurrency market, as well as the regulatory uncertainties and scrutiny that some of the largest exchanges are subjected to.
According to the report, the brief spike in volatility that occurred on August 17 and at the end of the month did not translate into sustained trading volumes on centralized exchanges.
This spike in volatility was triggered by risk aversion in traditional markets as well as Grayscale Investments’ legal victory over the United States Securities and Exchange Commission (SEC).
Crypto Exchange Market Share Changes: Binance Falls, Huobi Rises
Binance, the biggest crypto exchange by volume, saw its market share in both the spot market and the derivatives market drop for the sixth month in a row, to 38.5% and 53.5%, respectively, which is the lowest it has been since the middle of 2022.
The exchange has had trouble with regulators in a number of countries, including the U.S., where the SEC charged it in June with breaking securities law.
On the other hand, Huobi, another big cryptocurrency exchange, grew its share of the global spot market from 2.26% to 6.09%, making it the second-largest centralized spot exchange by volume.
Crypto Market Speculation vs. Fundamentals: A Closer Look
According to CCData, the low trading volume and open interest show that speculation rather than fundamentals is currently driving the cryptocurrency market. This conclusion is drawn from the fact that the market is currently driven by speculation.
According to the report, the market needs more encouraging news and developments in order to entice new investors and rekindle trading activity.
The approval of a Bitcoin exchange-traded fund (ETF) by the SEC, the adoption of cryptocurrency by more institutional and retail investors, and the innovation and growth of decentralized finance (DeFi) and non-fungible tokens (NFTs) are some of the potential catalysts that could boost market sentiment. Other potential catalysts include the adoption of cryptocurrency by more retail investors.
In conclusion, crypto trade volume has dropped to its lowest level in four years. This fall is due to low volatility, regulatory uncertainty, and a lack of market drivers.
The crypto exchange market is changing as Binance faces regulatory issues and Huobi gains ground. The market needs positive developments like SEC approval of a Bitcoin ETF, institutional and retail investor adoption, and continued growth and innovation in decentralized finance (DeFi) and non-fungible tokens to revive trading activity. These elements will determine the cryptocurrency market’s future.