The key role of the volume of trading in the analysis of the cryptocurrency market
The cryptocurrency market has become increasingly popular and unstable in the last ten years. Thanks to a wide range of cryptocurrencies, from recognized players, such as Bitcoin to new participants, such as Dogecoin, traders face many challenges when they try to predict market trends. One of the key factors that plays an important role in the evaluation of market trends is the volume of trading.
In this article, we will deepen the importance of the volume of negotiation in the analysis of the cryptocurrency market and we will examine because investors and operators are needed when they make investment decisions.
What is a trading volume?
The volume of the turnover refers to the total amount of current money on a specific couple of currencies or activities in one day. It provides valuable information on market moods, liquidity and price movements. The high negotiation volume indicates a high demand for cryptocurrency or specific activities, which suggests that buyers will gladly enter the market.
Why is trading volume important in analyzing the cryptocurrency market?
- Mercato **: the volume of trading can reveal changes in the moods of investors towards a cryptocurrency or specific activities. Since more and more traders buy or sell activities, its price can increase or decrease. And vice versa, reducing the volume of rotation can report the bears.
2 Low commercial volumes can indicate a lack of liquidity, which makes it difficult to introduce or get out of the transaction.
- Discover prices
: The negotiation volume helps operators and investors to understand how many activities the prices change in response to new information, such as editions of information, regulatory advertising or global economic events.
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How to interpret the rotation volume
- high volume : the high volume of rotation indicates a strong demand for activity, often accompanied by a significant price movement. This is a stubborn sign, which suggests that traders buy or willingly enter the market.
- Low volume : the low volume of trading can indicate bears, because less buyers are involved in the market. This is a negative signal, which suggests that traders can wait for prices to be withdrawn before entering the market.
- Volume trends : analyze the tendency of the trading volume to identify models and correlations with price movements. For example, if the volume of activity trading is constantly increasing within a few days or weeks, this can suggest greater demand.
Examples of a real world
- Bitcoin (BTC) rotating volume : in 2017, Bitcoin recorded a significant increase in prices after the commercial volume rally, which reached about 60,000 USD per coin.
- Commercial volume Ethereum (ETH) : During the correction of the market of April 2020, Ethereum’s commercial volume descended to about 40,000 USD, which led to many analysts to convince that the activities had to reverse prices.
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Application
The volume of trading is an important element of the analysis of the cryptocurrency market, guaranteeing precious information on market moods, liquidity and price movements. Understanding and interpreting the trends of the commercial volume, investors and operators can move better in the complex world of cryptocurrency markets and make informed decisions on their investment.
Since we are still witnessing the growing adoption and use of cryptocurrencies in various sectors, it is important that traders and investors have vigilant and adapt their response strategies to the changing market conditions.
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