“Volume” is a term used in the world of cryptocurrency to refer to how much money has been invested into that particular coin or token. For example, if I had 100 BTC and not sold any at all during the year, my total volume would be 0. However, if I bought 10 more Bitcoins on December 4th 2018 for $10 each (~$1k), then my total investment (volume) would be 1.

“Volume” is a term that is used in cryptocurrency to describe the amount of transactions that have been completed. The “volume” is usually measured in terms of bitcoin, or other cryptocurrencies. Read more in detail here: what is volume in bitcoin.

Investors use trading volume to determine how often an item changes hands, showing how popular it is to purchase or sell that asset at any one moment. Investors look at the volume of trade for a range of assets, such as stocks, bonds, and foreign currencies.

Trading volume is an essential characteristic that traders use to evaluate a coin’s future trajectory in cryptocurrency, in particular.

Crypto 101: A Beginner’s Guide to Crypto

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The Importance of Crypto Trading Volume

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The number of times a coin changes hands in a certain time period is referred to as crypto trade volume. Investors look at crypto volume based on trading on a certain crypto exchange or all crypto exchanges together.

The most typical period for measuring volume is 24 hours, and a bar chart is the most popular style for displaying this parameter. When it comes to cryptocurrency trading, greater volume usually means higher prices, while low volume usually means lower prices.

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Calculating the Volume of Cryptocurrencies

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The total value of a kind of cryptocurrency that has changed hands in a certain time is used to calculate crypto trading volume. If the entire quantity of Bitcoin is a digital currency (BTC) traded on Binance in the previous 24 hours was $10 billion, the 24-hour trading volume of BTC on Binance was $10 billion.

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What Is the Importance of Volume in Cryptocurrency?

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When trading coins with limited cryptocurrency liquidity on smaller exchanges, the relevance of volume becomes obvious. Let’s say a trader wishes to sell one million SHIB coins. However, the hypothetical exchange she’s utilizing has very little SHIB traffic. To sell 1 million SHIB, you may need to place hundreds of purchase orders, each one somewhat cheaper than the one before it.

As a consequence, the trader receives a lower price for her coins than she would have received if the exchange had more turnover (a process known as “slippage”). In severe circumstances, there may be no purchase orders at all, forcing a trader to place fresh sell orders in the hopes that they would be filled at some time.

Similarly, if someone wants to acquire a coin with low trading volume, they may end up paying more money than if trading volumes were larger. Prices rise as a result of having to buy up current sell orders.

Price stability and volatility are more likely to be associated with increased volume. Of course, spikes in volume and big price fluctuations are possible during times of intense fear or greed. Coins or assets with consistently larger volume, on the other hand, tend to have lower volatility.

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What Does the Volume of Cryptocurrencies Indicate?

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The amount of money traded in a cryptocurrency reflects how popular it is. The greater the number of individuals buying and selling anything, the higher the volume, which might lead to more demand in that coin.

Increases in trade volume indicate either a strong bullish or negative attitude. During their major market runs-ups, meme currencies like Dogecoin (DOGE) and Shiba Inu (SHIB) have seen a lot of volume. Interest in such coins tends to decrease with time, and volume falls in lockstep with the price.

A cryptocurrency with a high number of transactions may become a cryptocurrency with a low volume of transactions, and vice versa.

Investors who aren’t interested in purchasing or selling a certain item have a low trade volume. This might be due to a variety of factors. When prices and trade volumes vary, it might indicate that prices don’t represent the complete picture.

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Is it Possible to Fake Volume in Crypto?

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Yes, you may interchange quantities using a technique known as “wash trading.” This method entails putting both purchase and sell orders at the same time. The orders may cancel each other out, resulting in no substantial market change. This provides the impression of a lively market, but it’s only noise.

“It is commonly known that several exchanges undertake wash trading methods in order to increase trade volume,” according to crypto research company Messari.

Higher volume, the exchanges may feel, will tempt traders to use their platform, and the more traders who use their platform, the more money they will earn.

Wash trading may be done in a variety of ways, including:

  • A trader who is in cahoots with an exchange
  • A trader who is in cahoots with another merchant
  • High-frequency trading algorithms are used.

High-frequency trading (HFT) algorithms may be responsible for a large portion of the bogus volume in bitcoin markets. These are essentially computer bots that can execute a huge number of deals in a short period of time.

Fears about phony volume on exchanges may be one reason why some traders prefer decentralized exchanges, where volume is more difficult to fabricate.

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Cryptocurrency Volume

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Coinmarketcap is a well-known source for cryptocurrency prices and volumes. The platform, on the other hand, draws no difference between exchanges that may have a lot of wash trading and those that don’t. Messari collects “actual” volume data from exchanges that they are certain do not participate in wash trading.

This difference is critical since the results of looking at volumes for various currencies or exchanges might vary dramatically depending on the source.

According to Coinmarketcap, the top 5 crypto assets by 24hr trading volume on December 9 were:

  1. attach a attach a tether (USDT)
  2. Bitcoin is a digital currency (BTC)
  3. Ethereum is a cryptocurrency (ETH)
  4. USD Binance (BUSD)
  5. XRP is a cryptocurrency that is based on the (XRP)

According to Messari, the top five crypto assets by “actual” 24-hour trading volume were:

  1. Bitcoin is a digital currency (BTC)
  2. Ethereum is a cryptocurrency (ETH)
  3. Cardano is a cryptocurrency (ADA)
  4. US Dollar Coin (USDC)
  5. attach a attach a tether (USDT)

With or without suspected false trade transactions, the popular stablecoins USDC and USDT are among the top 5 coins by volume, according to these rankings.

Binance’s exchange token, BUSD, is fourth when including wash trades, but didn’t make the top five for real volume. Cardano is a cryptocurrency (ADA), a cryptocurrency designed for cheap, fast transactions and smart contracts, ranked second in real volumes but didn’t make the top five for volumes that include wash trading.

Bitcoin is a digital currency (BTC), the oldest and largest cryptocurrency, had volume of more than twice the next-highest volume coin.

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Is Volume a Required Metric for Coin Valuation?

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The most significant criterion for pricing a cryptocurrency, according to many crypto traders, is volume.

In a Coindesk study conducted in 2018, approximately 40% of respondents identified volume as the indication they couldn’t live without. They cited the fact that other technical indicators depend on a person’s skill to read charts, while volume is more objective.

Traders may assume the market is fatigued and will soon reverse direction if price and volume both collapse at the same time. When price rises and volume declines, on the other hand, investors frequently see this as a pessimistic indicator, implying that prices will shortly collapse.

According to a trader polled by Coindesk, trading volume “speaks to the veracity of price movement.” To put it another way, price movement alone might be deceptive. When volume is taken into account, a more complete picture of how the market is acting may be obtained.

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The Remainder

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The number of bitcoin transactions is measured by cryptocurrency volume trading. Much of what has been discussed here also applies to stock volume, however equities have stricter laws about wash trading.

More information is available at:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

SoFi Invest is a company that invests in small businesses. This material is not intended to be used as investing or financial advice. Individual financial requirements, aspirations, and risk profiles should all be considered while making investment selections. SoFi cannot guarantee its financial success in the future. SoFi Wealth, LLC provides advisory services. SoFi Securities, LLC is a FINRA/SIPC member. SoFi Invest refers to Social Finance, Inc. and its affiliates’ three investing and trading platforms (described below). Individual client accounts may be bound by the terms of one or more of the platforms listed below. 1) Automated Investing—Sofi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth”), owns the Automated Investing platform. SoFi Securities LLC, an associated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities”) provides brokerage services to SoFi Wealth LLC. 2) Active Investing—SoFi Securities LLC owns the Active Investing platform. APEX Clearing Corporation is in charge of clearing and custody of all securities. 3) SoFi Digital Assets, LLC, a FinCEN-registered Money Service Business, offers cryptocurrency. Visit www.sofi.com/legal for more information on the SoFi Invest platforms mentioned above, including state licenses of SoFi Digital Assets, LLC. For the sale of any product or service offered via any SoFi Invest platform, neither the Investment Advisor Representatives of SoFi Wealth nor the Registered Representatives of SoFi Securities are rewarded. This information on lending products is not intended to be an offer or a pre-qualification for any loan product provided by SoFi Lending Corp and/or its affiliates. Bitcoin and other cryptocurrencies are not backed or guaranteed by any government, are very volatile, and carry a high level of risk. Cryptocurrencies are not regulated to the same extent as conventional brokerage and financial products under consumer protection and securities regulations. Before investing in any cryptocurrency, it is necessary to do research and get information. Public warnings on digital asset risk have been published by US authorities such as FINRA, the SEC, and the CFPB. PDF File. Purchases of cryptocurrency should not be done using money borrowed through financial products such as student loans, personal loans, mortgage refinancing, savings, retirement accounts, or conventional investments. Trading some crypto assets is subject to restrictions, and it may not be accessible to citizens of all states.

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Cryptocurrency volume is the amount of cryptocurrency that has been traded in a given time period. The “crypto volume by month” will show you how much crypto has been traded in each month.

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  • what is 24 hour volume in cryptocurrency
  • what is a good volume for crypto
  • how to calculate crypto volume
  • crypto volume vs stock volume
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