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Crypto trading volume plunges 63% despite market cap recovery – Rally at risk?
Fear lingers despite gains—could another downturn be on the horizon?
As of March 12th, the global cryptocurrency market capitalization has seen a significant increase, reaching $2.71 trillion, a 1.13% uptick according to CoinMarketCap. However, beneath this surface-level recovery, analysts are sounding the alarm as crypto trading volume has plummeted a staggering 63% since its peak in February amid dip-buying, now standing at $163 billion, per CoinGecko data.
This sharp decline raises concerns about weakening momentum, suggesting that the recent uptrend may not be as strong as it appears. Moreover, market data from CoinMarketCap shows a similar trend, illustrating that trading volume peaked in early March before retreating by 52%. Santiment’s X data also corroborates these findings, highlighting a noticeable shift in trader sentiment, stating that consistently declining crypto-wide trading volume during slight price recoveries typically indicates diminishing enthusiasm.
Initially driven by optimism amid price dips, recent market capitalization declines have resulted in exhaustion, hopelessness, and capitulation among traders. Is this a bearish sign? As predicted, amidst shifting market conditions, investors are exhibiting increased caution, signaling skepticism about the sustainability of recent gains. The decline in trading activity suggests growing uncertainty, with fewer investors confident that current price levels offer substantial profit potential.
Moreover, the combination of weakening trading volume and modest price recoveries could indicate fading market momentum. Without substantial buying pressure to reinforce upward trends, any short-term gains are at risk of losing traction, potentially leading to renewed volatility in the crypto market. This might lead to a temporary rebound followed by another downturn.
However, despite the decline in trading activity during rebounds, this is not an outright bearish signal. It is essential to understand that trading volume reflects participation from both retail and institutional investors, and for sustained price recovery, an increase in volume is crucial. Thus, a resurgence in buying activity could serve as a precursor to stronger market trends.
Meanwhile, persistent fear in the market, as reflected by the Crypto Fear & Greed Index remaining below 50 at 45, indicates lingering uncertainty. Therefore, traders continue to remain cautious amid geopolitical factors like Trump’s tariffs impacting sentiment, awaiting clearer direction from the market.
Source: https://ambcrypto.com/crypto-trading-volume-plunges-63-despite-market-cap-recovery-rally-at-risk/
