What is volume in cryptocurrency: How to Use the Volume Indicator When Trading Cryptocurrency

What is volume in cryptocurrency

What is volume in cryptocurrency

On a 4-hour BTC chart like the one above, each volume bar represents the amount of BTC that exchanged hands during those four hours. A volume bar on an 15-minute BTC chart shows the amount of BTC traded during those 15 minutes. So how do we actually determine the exchange rate of different currencies? The price is determined on the basis of a number of sometimes unpredictable factors that ultimately influence the supply and demand of the market.

This indicator uses market sentiments to predict the direction of the price. Volume is simply the amount of a cryptocurrency traded within a given timeframe. In other words, it is the amount of cryptocurrency bought and sold within a particular timeframe, usually 24 hours. Volume is a clear summary of an asset’s demand and supply, which interacts to determine the market price.

By definition, volume measures the intensity and degree of importance of trends in the market. Its correct analysis allows you to understand the source of price changes and indicates when investors should sell or buy cryptocurrencies. A large volume often indicates a lot of interest in a particular coin and that we are likely to see rising prices soon. A small volume often signifies a lack of interest in a particular coin and that its price is likely to go down.

Some patterns, for instance the cup and handle pattern and double bottom pattern, should be formed with a very specific volume. Algorithmic Trading is a fast growing trend in financial markets. This text is informative in nature and should not be considered an investment recommendation. It does not express the personal opinion of the author or service. Any investment or trading is risky, and past returns are not a guarantee of future returns. High volume can be good because it indicates that there is a lot of interest in a particular coin.

What is volume in cryptocurrency

Over the last 24 hours, with BNB, the lion’s share of trading volume is unsurprisingly on Binance. But you’ll also see what the token has been traded with, for example BTC, ETH, and mainly USDT. Moreover, using the “Rising or Falling Market Interest” indicator is very common in cryptocurrency trading. When an asset’s price rises as the corresponding volume decreases, there is a high alert that the bull run will not last.

This is often done by wash trading, which is when a trader buys and sells the same coin multiple times to create the appearance of high volume. Although wash trading is illegal in many markets, it can be difficult to detect. A person or a group of people engaging in wash trading can even use a multitude of unique addresses to hide their tracks. Some traders use volume indicators to help them make decisions about when to buy or sell a particular coin. Other traders use volume indicators to help confirm other technical analysis signals. For example, a trader might use a volume indicator to help confirm a breakout on a candlestick chart.

There’s no one “good indicator” — all of them serve their own unique purposes. ETH/BTC is a popular cryptocurrency trading pair that denominates the price of Ethereum in Bitcoin. A greater volume of cryptocurrency transactions leads to fair cryptocurrency prices and removes the chance of distorted pricing.

Buy and sell Bitcoin the easy way

The platform is highly popular for its limited-time zero trading fees on spot trading. Moreover, its AI Arbitrage Bot can automatically find the best trading opportunities and bring you up to 90% annual returns. OthersUse our selection of the best cryptocurrency analytics tools to create strategies, grow your technical analysis skills, discover hidden gems. AirdropsJoining airdrops, giveaways, or bounties is an easy and risk-free way to earn coins, try out new crypto projects and learn more about them.

What is volume in cryptocurrency

Let’s say that Binance Coin traded $178,951,869 USD in 24 hours. This is usually also expressed in relation to how many Bitcoins and, in the case of BNB, how many ETH since BNB is an ERC-20 token. So high volume allows for easier inter-conversion between different cryptocurrencies, fiat money, and other assets. An easily-navigable exchange that offers a multitude of different pairings trading at significant volume is the ideal place to be for the average cryptocurrency investor. Basic economic principles tell us that something no one is willing to buy isn’t worth very much, andcryptocurrency exchanges work in the same way.

High and increasing volume does not always equal upward price movement. Bear markets tend to see increased volume due to many people rushing to sell off their assets. Nonetheless, higher interest in a coin or a token is always beneficial for traders as it brings more potential buyers and sellers. A greater volume of cryptocurrency being traded leads to fairer cryptocurrency prices and reduces price distortion.

Monitor trading volume in real-time across top crypto exchanges, including Coinbase Pro, Binance, FTX, Kraken and more. Similarly, a significant drop with considerable volume may point to an extended bear run. Of course, nothing is certain in trading, and even less so in the volatile cryptocurrency markets. But learning to effectively analyse trading volume can give you an extra tool in your kit. If a coin suddenly jumps in value by say 25%, that may look good on paper.

Market maker Auros raises fresh capital to repair finances hit by FTX collapse

This is because the Buy vs. Sell Counts deals with the total number of sellers and buyers engaged in the market order while the Buy vs. Sell Volume deals with traded assets. More sellers should give you the opportunity to buy at your desired price more quickly. On the operational side of things, cryptocurrency exchanges need volume to keep their doors open.

What Is Crypto Trading Volume: How It Affects Price

Price levels with historically high volume can also give traders an indication regarding where the best entry and exit points could be located for a specific trade setup. You must link a Telegram account before this alert can be received. You still need to verify your phone number before you can receive SMS alerts.

Russell 2000 Futures

Visit our FAQ to learn more about webhooks, or check out the quick start guide. Portfolio trackersStay up to date on the value of your crypto assets and monitor your profit daily with these cryptocurrency portfolio trackers. Similarly, if price is trending upwards, look for confirmation of decreased volume during pullbacks.

Money Flow Index is a range-bound indicator between 0-100, making it a lot easier to read. When using a trading chart you have to select the Volume indicator from the menu, which will be illustrated as a bar chart at the base. A person is given 100,000 liters of water to distribute to a community. Now, in order to do so, they require smaller barrels in various capacities such as 100 liters, 200 liters, 500 liters, and 1000 liters.

Cryptocurrencies with a higher market share usually have a higher volume of trading, which makes them safer investments, at least in theory. This is because they have higher liquidity and it is tougher to move the price up or down. We could also say that this is the number of coins on the market, but technically this is not quite true.

Unlike most crypto bots, you create and manage alerts from our web interface. However, if BTC price suddenly shoots up and is accompanied by a heavy trading volume, you can see that many people are making moves and deduce that it will likely continue to climb. If the price goes down and there is minimal trading volume, that may reveal a small number of people supporting the downward trend.

Coins with lower marketcaps will also require higher thresholds. Trading volume is so important because it can help you to identify a coin’s possible direction. Take a quick glance at sites such as CoinMarketCap and you’ll see the volume reported over 24 hours.

Displays the total amount of cryptocurrencies that have been exchanged over the course of the last 24 hours. In other words, it is the combined volume of buys and sells on a particular market in a given time frame. On most trading days, Bitcoin has an equal amount of buys and sells which keeps the price stable. When there is volatility in the financial markets, or news concerning Bitcoin breakouts, the volume immediately spikes.

The volume indicated is spread across a number of exchanges, each of which will have inefficient markets for anyone wanted to buy and sell the Shopping coin. So when looking at trading a given cryptocurrency, the total volume traded will immediately tell you how volatile it is likely to be. The change in volume over time will also give you a sense of interest in the project. A decline in trading volume despite a price movement in a direction might suggest a reversal or a price correction.

They collect transaction fees on trades through their platform—typically a percentage of the total value traded. Without a certain volume threshold, exchanges will ultimately fail to be profitable business ventures. Some crypto comparison websites also show you the theoretical market capitalization of a cryptocurrency if all coins were already in circulation. This metric is somewhat misleading because the dynamics of supply and demand would be completely different in such a scenario. In January 2018 Bitcoin’s market share was 32%, which was the lowest point in its history. That was when the whole crypto market was soaring to all-time high prices and ICO projects were extremely popular.

It is important to remember that no single indicator is perfect. Volume indicators should be used in conjunction with other technical indicators. A method in which investors put their money in two extremes of high-risk and no-risk assets while ignoring … The MFI indicator is used in reversal trading to identify support and resistance levels. If the indicator hits the upper boundaries, we can expect a correction.