Declining Crypto Trading Volumes Signal Weakening Market Momentum and Trader Caution
Crypto-wide trading volume has been on a downward trend since February, following a brief surge driven by dip-buying activity.
Trading Volume Plummets in March
According to CoinGecko data, daily trading volume peaked at $440 billion in early February, the highest level of 2025. However, by March 12, it had dropped by 63%, falling to $163 billion. CoinMarketCap reported similar figures, showing that trading volume peaked in early March and has since dropped by 52%.
Diminishing Trader Enthusiasm
Santiment, an analytics firm, highlighted the decline in trading volume as a sign of waning enthusiasm among crypto traders. On March 13, the firm noted that when trading volume decreases, even during slight price recoveries, it suggests traders are losing interest.
“When trading volume for major cryptocurrencies consistently drops, even during slight price recoveries, it typically points toward diminishing trader enthusiasm,” Santiment stated.
“Trader behavior indicates a mix of exhaustion, hopelessness, and capitulation.”
This pattern follows market capitalization declines, which have dropped by almost 25% since February, equating to a loss of $900 billion. The trend has accelerated over the past 10 days, with markets losing 15% due to fears of a U.S. recession and global trade tensions.
Traders Becoming More Cautious
As trading activity weakens, Santiment suggested that traders are becoming more cautious and skeptical about the sustainability of price increases.
“Essentially, reduced trading activity reflects uncertainty, as fewer traders are convinced that buying at current levels will yield profitable outcomes,” the analysts added.
“Weakening trading volume amid minor price bounces serves as an early warning sign of weakening market momentum.”
Without strong buying participation, any price increases may quickly lose momentum due to a lack of underlying support. This could result in temporary rebounds followed by potential downturns.
Volume Still a Key Indicator for Market Health
However, the decline in volume during minor rebounds is not necessarily a bearish signal. Santiment noted that while volume measures market participation, both retail and institutional, it is essential for volumes to rise before prices can sustain upward movements.
“To signal a healthier and more sustainable recovery, bulls generally will want to see both rising prices and rising volumes simultaneously,” Santiment concluded.
Market Outlook
The total crypto market capitalization is currently around $2.8 trillion, the same as it was this time last year before a period of consolidation. Despite this, the Crypto Fear & Greed Index remains in fear territory, staying below 50 since February 21, indicating ongoing uncertainty and caution within the market.In summary, shrinking trading volume amid minor price recoveries signals weakening market momentum. Traders remain cautious, and without an uptick in both trading volume and prices, market volatility could continue in the short term.
Editorial Team
Reporter at Coindoo
