Ever since the beginning of the crypto winter in 2022, the cryptocurrency market has been in a state of ruins. As a result of the winter, cryptocurrencies lost a great chunk of their value. Similarly, inflation rates managed to hit an all-time high percentage, and the FED frequently increased interest rates. The main aim of doing so was to steer the economy toward a recession. As a result of the continuous increase, cryptos kept losing their value. For a common cryptocurrency investor, the situation became a nightmare. For the longest possible time, investors believed Bitcoin (BTC) to be a hedge against inflation. Things went south when Bitcoin (BTC) itself ended up getting affected.
Things escalated with the collapse of the cryptocurrency exchange, FTX. Cryptocurrency firms linked with FTX had to face several setbacks as a result. Apart from that, many other cryptocurrency-based organizations had to indulge in major reshuffling processes. A few of them actually ended up filing for bankruptcy whereas the rest reduced their headcounts. Letting employees go was considered as an effort to survive in an already difficult market. With the collapse of the cryptocurrency exchange, many investors and firms ended up losing their assets.
Such setbacks stripped investors of their confidence regarding investing in crypto. Cryptocurrencies are trading at their all-time lows, and this doesn’t offer any real value to investors either. This is a direct result of the cloud of uncertainty that looms in the cryptocurrency market. Cryptos aren’t expected to go back up anytime soon, and investors find no reason to hold onto tokens or buy them.
Understanding the Low Trading Volume
Considering how the cryptocurrency market had to face great problems, the total cryptocurrency trading volume had to face a great decline. However, the observation regarding low trading volume can be approached in two ways. The first is understanding reduced resistance and sell walls. Sell walls can simply be described as large selling orders. These prevent market prices from going up until the selling process is fully complete. As a result, whales have to step in and boost the prices with ease.
📊 There are two ways of looking at #crypto's 2.5 year low level of trading volume:
😏 Less resistance & sell walls, leading to whales pumping prices easily
😬 Utility is limited with less order book activity, which could cap long-term #bullrun potentialhttps://t.co/mD0NRAWNso pic.twitter.com/d0rJS8hocX
— Santiment (@santimentfeed) January 8, 2023
The second perspective is understanding that utility is greatly limited as a direct result of lesser book activity. Under such a phenomenon, a long-term bull run potential could be greatly minimized. A positive bull run is responsible for keeping prices high constantly for a time frame, after all.