What is volume in cryptocurrency?
Understanding the volume in cryptocurrency trading plays a crucial role in technical analysis. Volume, the total amount of crypto traded within a specific time frame, serves as a key indicator of the strength behind price fluctuations.
A high trading volume indicates a high level of buyer interest and selling pressure, suggesting that the trend is strong and likely to continue. Conversely, a spike in volume can signal upcoming changes in price action, guiding both high net worth investors and average traders.
In essence, volume is an important metric that sheds light on liquidity, market trends, and the commitment behind buying and selling actions in the crypto market. Whether a trend will hold or reverse, the volume traded provides vital clues to navigate the volatile waters of cryptocurrency trading. In the last decade, cryptocurrency market have become hugely popular with many people worldwide.
There’s hardly a person who hasn’t been interested in learning more about crypto, how Blockchain works, which is why it is so popular, but above all, what is volume in cryptocurrency.
From the appearance of the first cryptocurrency, Bitcoin, in 2009 until today, many enthusiasts have desired to provide themselves and their families with a significant income with their help.
The question “What is volume in cryptocurrency” is one of the most common questions that many crypto enthusiasts ask when learning about this industry. Since this is very important to understand in order to be successful in investing in cryptocurrencies, in this article, you’ll get all the answers about crypto’s trading volume.
However, before we give you a definition and explanation of what volume is in cryptocurrency, we’d like to overview cryptocurrencies in general briefly.
Cryptocurrencies – a brief explanation
By a strict definition, cryptocurrencies represent digital currencies developed to work as a medium exchange via computer networks that aren’t reliant on any third party to uphold it, such as banks or governments. Cryptocurrencies allow people to purchase goods and services to trade them for profit.
Cryptocurrencies utilize cryptographic techniques supported by Blockchain technology, which maintains a record of transactions and keeps track of who owns what. Blockchain was invented to create purely digital currencies, preventing individuals from copying their holdings and attempting to spend them twice.
Individual units of cryptocurrencies
Individual units of cryptocurrencies are commonly referred to as tokens or coins, depending on how they’re used. Some individual units are intended to be stores of value, others as units of exchange for services and goods, while others are created to help computer networks that carry out more complex financial transactions.
How are cryptocurrencies created?
The most usual way cryptos are created through mining. It’s a competitive process that adds and verifies completely new transactions to the Blockchain for cryptos that are utilizing the PoW method.
Some amount of the currency and other transaction fees are awarded to the miner who wins that competition. Other cryptocurrencies are using different methods to develop and distribute tokens. Now, it’s time to answer the question “What is volume in cryptocurrency” since it’s one of the most commonly asked questions regarding cryptocurrency topics.
Learn what is a volume in cryptocurrency trading
Trading volume, in general, represents a metric that crypto investors use to see two things:
- How often a particular asset is trading hands
- How popular it’s to purchase or sell that particular asset at any time.
Trading volume is significant because investors would like to examine the volume for various securities such as bonds, stocks, and international currencies.
When wondering what trading volume in a cryptocurrency is, it’s essential to understand that trading volume refers to a crucial factor that crypto traders use in order to determine the potential trajectory of a coin.
In other words, the volume measures how many times a particular coin changes hands over a given time. Crypto volume baked on either all exchanges combined or trades taking place on a given crypto exchange is analyzed by investors.
What does crypto volume indicate precisely?
The simplest way to realize what crypto volume indicates is to present the absolute amount of interest in a particular cryptocurrency. Thus, if more individuals buy and sell a cryptocurrency, the higher the volume is. It can drive even more interest in that crypto.
It’s crucial to understand that high-volume crypto can quickly become a low-one and vice versa. On the other hand, the low trading volume represents a lack of interest in buying or selling particular crypto, resulting from many things. Once prices and trading volumes diverge, we clearly see that prices aren’t “telling the complete story.”
How to calculate cryptocurrency volume?
Crypto trading volume calculation requires determining the total value of a type of cryptocurrency that’s changed hands during a particular period.
Here’s one example: the total amount of Bitcoin traded on Binance in the previous 24 hours added up to $10 billion. Thus Bitcoin’s 24-hour trading volume on Binance equaled $10 billion.
What is a 24h volume in cryptocurrency?
The most usual timeframe for measuring volume is 24 hours. A bar chart is the most typical format that’s used to show this metric. Typically, high-volume cryptocurrency trading could increase prices, while low-volume cryptos could mean prices are falling.
In short, a 24h volume in cryptocurrency means the total monetary value of cryptos traded in the last 24 hours on one of the most popular platforms for crypto exchange. So, you can view it as a total amount of buy and sell orders that have happened within the past 24 hours.
It’s used to evaluate the volume of particular crypto that can also evaluate the amount of interest that it’s receiving globally. Thus, if you’re wondering what cryptocurrency to trade and how you can trade it, it’s possible to find a crypto exchange and try to buy it in that fashion.
Why is trading volume so essential in cryptocurrency?
Those who were wondering “what is volume in cryptocurrency” would want to know why it is so essential. Trading volume is significant when trading coins with low crypto liquidity on smaller exchanges. The importance is greater as liquidity is smaller.
For instance, a trader aims to sell one million Shiba in coins, and hypothetically, the exchange he’s using doesn’t have much SHIB volume. To sell one million Shiba Inu crypto means that he needs to go through dozens of buy orders, while they include a slightly lower price than the previous one.
What does this result in?
The final result is the trader receiving a lower price for its coins than he might have if the exchange had higher volumes. It’s a well-known phenomenon called “slippage”. Also, there wouldn’t be buy orders in general in some extreme cases. The trader is able to make new sell orders, hoping they’ll get filled at some time.
It’s the same once someone would like to purchase a coin with low volume. We can expect them to spend more money than they should have in case of higher trading volumes since buying up existing sell orders bids prices much higher. Keep in mind that higher volume mostly means less volatility and higher price stability. However, there could be surges in large price movements and volume due to times of greed and fear. In general, assets and coins which are known to have higher volume include less volatility.
The cryptocurrencies with the highest volume at the moment
In addition to the question “what is volume in cryptocurrency”, there’s also a great interest in which cryptocurrencies have the highest volume at the moment. At the time of writing, the cryptocurrencies that have had the most significant trading volumes in the past 24 hours are as follows:
- Bitcoin (BTC – USD) with a market capitalization of 896.60B
- Ethereum (ETH – USD) with a market capitalization of 401.99B
- Tether (USDT – USD) with a market capitalization of 81.40B
- Binance Coin (BNB – USD) with a market capitalization of 71.84B
- USD Coin (USDC – USD) with a market capitalization of 52.09B
- Ripple (XRP – USD) with a market capitalization of 41.75B
- Cardano (ADA – USD) with a market capitalization of 40.04B
- Solana (SOL – USD) with a market capitalization of 35.86B
- Terra Luna (LUNA1 – USD) with a market capitalization of 33.85B
- Avalanche (AVAX – USD) with a market capitalization of 24.42B
It’s important to understand that the results of these volumes can vary depending on the source you’re looking at. In general, this table varies a lot, so we highly recommend that you always check the current search day table.
Is trading volume crucial for the value of cryptocurrencies?
To whether the third volume is crucial for the value of cryptocurrency, the most significant possible answer is yes. According to many experienced traders, the third volume is the most important metric for determining the volume of a cryptocurrency.
More than 40% of traders on a Coindesk survey chose trading volume as an essential indicator they cannot imagine trading without. For that reason, many new traders just entering the world of cryptocurrency trading are wondering, “what is volume in cryptocurrency”.
However, once they learn the answer to that question, they realize that trading volume is the most objective indicator they can use since others rely strictly on an individual’s ability to interpret charts.
Keep in mind that once a price and volume fall together, it’s evident that traders could think the market got exhausted and will revert to the course as soon as possible. On the contrary, once price rises and volumes fall, investors could think of it as a clear sign that prices will pull back soon.
Conclusion
In conclusion, we’d like to point out one quotation from one trader that stated, “Trading volume speaks to the sincerity of price action”. In translation, we can understand that the movement of prices alone could be deceiving. Once separating in volume, it is much easier to realize market behavior.
