Why Does Volume Matters in Crypto?

Why Does Volume Matters in Crypto?

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Trading can take many forms, just as there are many traders. Deciding whether a specific investment route is a perfect fit for you is established on an array of diverse factors, such as the types of assets that best fit your risk tolerance, expectations, market experiences, and the time you’re willing to invest in managing your assets.

With the introduction of cryptocurrency trading, the world of finance has completely changed. Cryptocurrency has become an asset class on its own as it gains legitimacy and popularity. However, the market is still nascent, and we can all agree it does not operate like your conventional market.

Interestingly, when it comes to dissecting and studying markets, traders tend to develop their trading styles. These trading styles determine if trades are going to be triumphant or tragic. Traders utilize a number of indicators to analyze the market and confirm their predictions. However, since the Cryptocurrency market is still nascent and it does not operate like the conventional market, what indicator is the best to use for the cryptocurrency market?

A recent poll conducted by a notable platform revealed that volume was the leading indicator of choice for most traders, followed by the Relative Strength Index. Considering there is an unsurmountable number of trading indicators available in the market, such as Elliot Waves, Moving Averages, Stochastic oscillators, among others, why was volume chosen as the best indicator?

Trading volume and Cryptocurrencies.

A plethora of major metrics are used to assess crypto assets and provide a direction of an asset’s trajectory. One of the most useful and preferred metrics is the circulating supply. The number of coins in circulation that are used, traded, bought, and sold significantly impacts the asset’s price as it determines the token’s liquidity. Another useful and common metric is the market capitalization of a token, which is defined as the product of the circulating supply and the current price of an asset. This is because cryptocurrency developers do not publish financial statements; therefore, the market cap is one of the more important indicators that help determine the investment potential of an upcoming asset.

Lastly, there is a trading volume. An asset’s trading volume is defined as the total number of transactions on that asset. In the trading volume, each coin is recorded as it is purchased and sold. It depicts how frequently the asset has changed hands, its popularity, and its value.

Trading volumes are often measured in 24-hour time frames across all exchanges. Data from all the exchanges are aggregated to establish general trading volume. However, note that the publicly traded volume may not accurately indicate the true potential of a token as most trades are made in private over the counter market, which accounts for a large volume of the asset’s activity.

So why is Crypto trading volume so important?

The cryptocurrency market is a decade old. It’s relatively nascent in contrast to most markets today. Moreover, the market is highly volatile. It goes through aggressive swings, and it’s hard to predict where the market will be tomorrow. With over 9000 unique assets listed on various cryptocurrency exchanges, traders need to determine which of these unique assets is promising. Therefore, to assess the credibility, viability, feasibility, and sustainability of a token, volume is key.

While newly listed coins on the market may have a lot of hype surrounding it; however, they may not have any trades, depicting that investors aren’t all on board for the particular project. Although, in contrast, assets with a high volume mean that it is a healthy investment, and investors have a lot of faith in the project. This is because high volume translates to higher stability and liquidity rates.

Similarly, low trading volumes indicate that the coin may be dead and is on the brink of existence. The volume of trading an asset generates on different exchanges can be a key factor in choosing where to trade. Several exchanges have distinct geographic focuses, so tracking volume by exchange could be a very useful way to figure out how the action for a particular asset is distributed.

Moreover, when looking out for platforms with high trading volumes, you should look for reliable, regulated operations with a credible reputation in the crypto sphere. These platforms tend to experience the most traffic and serve as the center for people buying, selling, and trading assets.

How should you evaluate trading volume?

In terms of assessing high trading volume cryptocurrency, traders must search for assets that are experiencing significant activity across multiple exchanges. Using this indicator, it is possible to gain a clearer and more accurate insight into an asset’s trading value, and to see if the price is rising or falling.

The number of tools you can use to calculate total trading volume is that there are both free ones and premium ones that allow you to compare the trading volume of different assets over a certain period of time. To put it simply, if the price level of a certain asset is being supported and the order book inventory is seeing high demand. You can easily predict the asset’s price to surge with increased volume and new orders. However, since the market is highly volatile and could experience aggressive swings in value and trading volume, you must tread carefully as the asset could be overvalued and end in a tragic spot.

When determining the trading volume of various cryptocurrency exchanges and trading platforms, you must learn to understand and operate an order book. The order book is a list of pending orders being placed on exchanges for a specific token. Buying and selling orders at the same time are listed in the order book. The order book can be a great tool to determine interest levels and opportunities in the market.


There is a growing positive sentiment among investors and traders regarding the cryptocurrency market. However, the market doesn’t operate like conventional markets and could be very detrimental to users, traders, and investors who dive in looking to make quick gains. Similarly, there’s a lot of people that oppose or fear the cryptocurrency market; however, little do they know is that they don’t need years and years of experiencing learning how to read candlesticks and graphs; instead, they can rely on the trusty market cap, circulating supply, and trading volume to determine if the project has potential or not. What do you think? Why does volume matter in the crypto sphere?

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