If only it were January again, when the crypto market shot up rapidly. Bitcoin (BTC) reached a new all-time high (ATH) and many altcoins recorded strong price gains. What was striking, however, was that trading volume dropped significantly during this bullish phase.
Crypto traders hit the brakes
Major bank JPMorgan revealed this surprising development in a recent report seen by CoinDesk, which showed that crypto trading volume fell by a whopping 24% while the total market capitalization rose to $3.4 trillion.
The decentralized finance industry (DeFi) and the market for non-fungible tokens (NFTs) also seem to be losing momentum. What was previously booming now seems to be cooling down. Less activity, less trading – but why? Are investors actually losing interest or are they just waiting for the next big opportunity?
Less trading but rising prices – what’s behind it?
The recent price increases seem to be driven less by active traders and more by institutional demand and market sentiment. Large players such as whales and financial institutions are buying up crypto assets and holding them for the long term rather than actively trading them. Instead of trading frequently, they are making less frequent but larger purchases. The result? Rising prices but declining trading volume.
What does this mean for the coming months?
The growing interest of institutional investors was fueled in part by the new Trump administration. Although his current trade war is causing uncertainty, expectations were extremely high before and after his inauguration. Many investors speculated on more crypto-friendly regulation and a positive market environment, which increased the inflow of institutional capital.
If the regulatory landscape moves in a positive direction again, market confidence could rise again. Institutional investors could then invest on a large scale again, which could not only boost trading volumes but also revitalize the entire crypto industry.
