Crypto trading volume falls below $10 billion

Just before year-end, daily crypto trading volume hits a new low.

Just before the end of the year, daily crypto trading volume hits a new low. How should this trend be interpreted?

Daily crypto trading volume dipped below the $10 billion mark during the holidays for the first time since 2020. Since then, the 7-day moving average has fallen even further. According to data from The Block, it’s around eight billion dollars.

There can be several reasons for this, says BTC-ECHO market analyst Stefan Lübeck: "On one hand, this trend is largely tied to a reduction in risk-taking by institutional investors. Since the U.S. Federal Reserve began draining liquidity from the financial market earlier this year to tackle the inflation problem, professional investors have been pulling back from large investments in risky asset classes."

This is also affecting the crypto market, Lübeck notes: "On the other hand, crypto investors have increasingly shifted to hodling (i.e., long-term holding) of their crypto investments to be able to sell positions, sometimes tax-free, in the next bull market. Because volatility in the market has also fallen sharply on a year-over-year basis in recent months, the chance of short-term trading profits has decreased as well."

The market expert remains optimistic: "Just as in the past, this trend should reverse more and more once BTC halving grabs investors’ attention again. Whether the situation is tough or not, contrarian investing and staying the course in financial market investing has always been a solid long-term profit strategy," Lübeck said.

The bear market has had a big impact on the crypto market over the past month. Many companies in the space faced liquidity problems, causing many to topple. The biggest example of this is FTX. The company behind the arrested SBF sparked a domino effect.