Bitcoin trading volume: what's going on?

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Since January, bitcoin trading volume on exchanges has been slowly dropping (more or less, on average), but it's had a significant drop around May 13th, and has stayed low since then. I checked the volume from BTC China mainly, but it seems several (if not all) exchanges exhibit this phenomenon. Up to this point, I'm just stating facts.

My question is: does anybody know about any reasonable explanation for this? I mean, based on facts, evidence, or meaningful experience on the subject. For example, has this happened before? If so, it could be some temporary/cyclic phenomenon, maybe (?). Also, if this happens to be some sort of pattern that has occurred before, can we expect the volume to go up again anytime soon? Is it some sort of "bad sign" ? (as in "this pattern is often followed by a big crash" or something like that).

I know nobody has the crystal ball, and I'm not asking for unfounded opinions; I just thought that maybe someone with more financial experience or knowledge on the subject (than me, which shouldn't be very hard) could shed some light on this.

Juan

Posted 2015-06-11T19:16:08.327

Reputation: 93

That's a good edit, but the question appears still very speculative too me. For example my guess would be that it is the overlay of us going through the Trough of Disillusionment of this hype cycle and summer starting. Bitcoin is still very much hobby driven, and people spend less time on computer hobbies during the summer. In the past years Bitcoin was exhibiting more growth in winter.

– Murch – 2015-06-13T08:14:33.607

I don't see how it hurts if people are allowed to post such answers. In other SE sites I've seen really bad questions being answered, and sometimes the answers themselves addressed the flaws of the question. If my question is so unworthy of being answered, why not leave it alone (and just let it get no answers, eventually)? Why prevent everyone from answering? I'll have to ask somewhere else, or keep wondering. And I don't get the point. – Juan – 2015-06-14T02:41:30.680

I've reopened the question. In any answers, please focus on facts and argument supported statements. Posts consisting only of unsubstantiated claims and opinions will be treated as low-quality. – Murch – 2015-06-14T16:21:06.650

I am not sure that exchanges show us correct "trading volumes". Can we trust these digits? – amaclin – 2015-06-14T16:44:00.673

@amaclin I don't know, but there's no better source. Besides, all or most exchanges' data agree with each other. – Juan – 2015-06-15T03:52:25.233

@Murch thanks. If nobody answers, ok, but let's at least let them. – Juan – 2015-06-15T03:56:49.097

Answers

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This question could be asked of any financial instrument. Volumes decreasing is not a bad or good sign. It's simply something that occurs when volatility decreases. The market theory behind it might go like this.. Price has fallen to such low points sellers are no longer interested in selling. Buyers are still hoping for lower prices. This effect causes the price to trade within a range where anytime the price rises to an acceptably high level sellers begin to sell again and any time it reaches an acceptably low level buyers begin to buy. As traders notice the price is range bound more traders stop trading. This compounds decreasing volumes and also decreases the trading range. Eventually this will lead to reduced trading interest which can then lead to the price breaking out of the range in the direction of least resistance (as traders give up their respective buying or selling).

Sorry there is no provable answer to your question, as this is all market theory. However, if you were to look at different financial instruments historical volumes you would see many instances similar to what is currently happening in bitcoin's market volumes. This is a common pattern in markets and is normally described as not predictive of future events (range trading is often thought as having a random breakout direction).

https://en.wikipedia.org/wiki/Triangle_%28chart_pattern%29#The_symmetrical_triangle

Brandon

Posted 2015-06-11T19:16:08.327

Reputation: 286

Thanks for anwering. So it seems it isn't that strange for this to happen, and there's no useful info to extract. – Juan – 2015-06-16T14:43:51.957

Asked: 2015-06-11T19:16:08.327

Viewed: 303 times

Active: 2015-06-16T01:34:06.890