How does bitcoin’s trading volume affect other cryptocurrencies?
Occasionally, bitcoin’s trading volume is one of the most accurate methods in predicting the prices of other cryptos. The reason behind this is the influence bitcoin has on other cryptos. Before now, bitcoin used to have fat market dominance, and since most coins have bitcoin as their trading pairs, it becomes relatively easy for them to cast in bitcoin’s shadows. Altcoins, however, seem to be exempted from this phenomenon. Nonetheless, they still fall in its shadow.
What is bitcoin’s trading volume?
In simple terms, the bitcoin’s trading volume is an indicator of how the bitcoin market progresses. It helps to explain how many bitcoins are bought and sold per time on exchanges. So, it is safe to say that the higher the trading volume, the higher the on-chain activities –for example, the deposits and withdrawal of money. In June 2021, the trading volumes on some exchanges fell about 40%. Low price activities and low volatility were some of the causes of the sharp decrease in trading volume. However, it should be noted that during this time, the bitcoin blockchain recorded a monthly low, seeing bitcoin price at about $28,900,totaling about a 6% decrease. The maximum daily trading volume was $138.2 billion, seeing a 42.3% decrease compared to the previous month.
How does bitcoin’s volume affect other cryptocurrencies?
As mentioned earlier, bitcoin has a huge dominance over the whole crypto market. However, this dominance is reducing by the day, although its influence is still negligible. Here are some of the ways in which bitcoin’s trading volume affect other cryptos
- It puts bitcoin first and others in its shadows:
It is no news that the trading volume of cryptos increases as their prices increases. So, if there’s a healthy relationship between price and trading volume, it’s only economical to draw this conclusion. Bitcoin’s priceis more than 7times the price of ethereum. With this, new traders and newbies in the cryptocommunity would rather go for cryptos with the largest price. Only those with full information regarding the crypto market understand there ismuch more to trading and crypto investing than price.
- It could be easily manipulated:
One of the several reasons why traders and newbies must be conversant with their exchange platforms is the rate of manipulation. It’s important that you choose the right platform to trade cryptos because most exchangers manipulate figures and trading volumes just to keep traders busy on their platforms. Since it has been established that the price of crypto to an extent depends on trading volume, it becomes quite easy to manipulate the trading volumes using the concept of spoof trading. Spoof trading is when traders or exchange platforms enter orders for other traders to see, contributing to the increase in the trading volume. These entered orders are, however, withdrawn before they get filled. So, it’s more of pseudo trading, and it’s rampant on the bitcoin network. One of the exchange platforms where you can trade conveniently without worrying about trading volume manipulation is Bitvavo.
Calculating the exact trading volume of bitcoin as well as other cryptos is not as straightforward as it appears. Several factors need to be considered in other to get the exact figure. So, in other not to keep roaming on the spot, price is regarded as a more practical means of speculating the exact trading volume of any crypto. In this same instance, bitcoin’s price is currently around $46,000, which means compared to the price recorded in June, bitcoin’s trading volume must have increased. On most exchange platforms, you are most likely to see the last 24hrs trading volume of your favorite crypto in percentage. It is, however, not advisable to use trading volume to determine if or not you’ll be investing in a cryptocurrency. Endeavor you go through all the details involved before investing your money.
As mentioned earlier, the trading volume of any cryptocurrency displayed on the exchange platforms is not the exact trading volume of that crypto. Some of the trading volumesare also outside the exchange platform, mostly in the OTC market (Over The Counter). There are several trading pairs per crypto, and each also accountsfor a said percentage in the overall trading volume. Hence, it becomes stressful to speculate the exact trading volume of any crypto, the almighty bitcoin inclusive. Generally, trading volume is increasing, and it’s healthy progress for the entire cryptocurrency community. What this means is that the community is becoming flooded with investors by the day.
