Bitcoin Trading Volumes Have Collapsed – Here’s What That Means for the BTC Price?

In recent days, Bitcoin trade volumes have drastically decreased. The daily trading volume of Bitcoin on the largest exchanges dropped as low as $14.5 billion on Monday, according to data obtained from CoinGecko, marking the lowest level since March 5.

That represents a sharp decline after the month’s peak of $70 billion in daily Bitcoin trading volumes, which was the largest level since the days following the FTX meltdown in November.

It would indicate fading investor interest in buying Bitcoin at its present price of around $27,000 as US regulatory concerns grow and worries about a US bank catastrophe recede.

It might be due to fewer fiat-to-crypto on-ramps following the failure of cryptocurrency-friendly banks in the US earlier this month (most notably, the collapse of Silvergate).

It is concerning that the decrease in Bitcoin volume earlier this month came after a rapid decline from mid-$22,000 levels to under-$20,000 levels, which was dramatic but ultimately short-lived.

Bulls of Bitcoin will be hoping that BTC doesn’t tumble to critical support in the $25,000 range from current levels.

Recent weakening seen in several indicators indicating activity on the Bitcoin network has added to pessimistic sentiments.

CFTC’s Binance Lawsuit Weighs on Volumes

Prior to the US Commodities Futures and Trading Commission’s statement that it will sue Binance, trade volumes started to decline. Yet, the lawsuit isn’t going to make things better.

If Binance is set to be classified as an unregistered/unlicensed exchange in the US, major market makers and institutional participants in the cryptocurrency space will be increasingly wary of working with it.

Also, Binance handles the bulk of cryptocurrency trading volumes. The Block’s research indicates that, in February, Binance accounted for a startling 62% of all cryptocurrency trading volumes worldwide.

But, since they stopped offering zero-fee trading for Bitcoin pairs, their influence has been declining.

The so-called 2% market depth of Bitcoin has recently declined, and this has been much discussed in the cryptocurrency community.

The quantity of buy and sell orders on exchanges that are only 2.0% away from the current price are waiting to absorb liquidity.

A more volatile market results from a drop in 2% market depth, which makes it simpler for huge orders to change the price of BTC.

Option Investors Remain Sanguine on Volatility Risks

Investors seem to still be somewhat upbeat about the risks associated with price volatility despite the continued reduction in the depth of the Bitcoin market and the dramatic recent decline in trading volumes. At least, that is the impression conveyed by option market price.

Deribit’s Bitcoin Volatility Index (DVOL), which had previously reached monthly highs of 73, has recently been declining and was last seen at about 62.

Even while it’s significantly higher than earlier March levels in the 50 region, it’s still quite low historically. The main exchange for Bitcoin derivatives is Deribit.

While Bitcoin may experience some turbulence in the near future, many observers believe that the cryptocurrency still has a bright future.

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