Bitcoin Trading Volumes Plummet to a 6-Year Low — Uncovering the Crucial Insights

Key Takeaways

• Bitcoin trading volume hits a 6-year low.
• Low whale activity occurs as the number of large transactions is the same as in December 2016.
• Chart analysis shows a bearish outlook.

We previously highlighted Bitcoin‘s decline to its lowest point since 2021 on August 11th when it reached approximately $6 billion. This downward trend has persisted throughout August and September, ultimately leading to its lowest point in six years.

Recent data  from CryptoQuant reveals that daily transaction volumes this week ranged from 8,000 to 15,000, marking a significant drop from the over 600,000 transactions recorded in March.

One significant factor contributing to this decline is the mounting apprehension surrounding the macroeconomic landscape. Actions taken by the US Central Bank have heightened investor uncertainty and raised concerns about a potential recession.

Notably, this decrease in spot trading reflects a growing preference for holding cryptocurrencies over the long term. Instead of seeking immediate gains, many individuals now view cryptocurrencies like Bitcoin as long-term investments. They choose to retain their coins, having faith in their future value, rather than seeking quick profits through frequent trading.

In this analysis, we will scrutinize key metrics to substantiate or challenge these assumptions.

Bitcoin Fundamentals

Bitcoin withdrawals from exchanges have exhibited a consistent pattern. According to CryptoQuant data , we’ve observed an unbroken decline since May 1, 2023, reversing a previous uptrend during which exchange wallets held as many as 2,240,194 BTC.

This decline occurred prior to the price surge to $30,300 in mid-April, a period when many anticipated a significant selloff. Despite this, Bitcoin persevered, achieving a minor higher high in July. However, the accompanying low trading volume raises questions about the sustainability of this price increase.

Regardless, accumulation persisted even at these elevated price levels, resulting in the total Bitcoin held in exchange reserves now reaching its lowest point since October 2020, slightly above 2 million BTC.

When it comes to long-term holders , they have been consistently selling at a profit, indicating their earlier accumulation at lower price levels.

Currently, this metric stands at 1.26 of its 7-day Simple Moving Average (SMA), showing a slight decline from its peak of 1.43 on September 20. However, data  from IntoTheBlock reveals a significant decrease in the number of large transactions during September.

It currently stands at just 13,170 transactions, a level not witnessed since December 2016. This suggests that Bitcoin whales have been displaying minimal activity and are likely biding their time on the sidelines, awaiting a clear market direction as uncertainty prevails.

Nevertheless, the majority of market participants find themselves in a profitable position . Among all addresses currently holding BTC, 58.99% are ‘in the money,’ while 36.38% are ‘out of the money.’ Only 4.62% hover around the break-even point at the current price of approximately $26,000.

BTC Price Analysis 

When assessing the price of Bitcoin, our bearish outlook remains intact. We see two scenarios unfolding, both suggesting a potential short-term uptick but, at the very least, a near-term downside.

The distinction between these two scenarios hinges on whether we consider the increase from November 21 to July 14 as the initial impulse of a bull cycle or as the third wave in an ABC correction that began on June 18 of the previous year.

In the first case, the price has completed its initial sub-wave within the bull market and is now poised for its first correction, which is expected to establish a higher low. The most optimal price target for this correction would be $22,000.

Conversely, if we regard the July 14 high of $31,700 as the conclusion of the C wave in the ABC correction starting on June 18 the previous year, we are now witnessing the end of this upward correction, with the subsequent establishment of the final bear market low.

The exact location of this final low remains uncertain, but in the worst-case scenario, we identify a significant support zone around $11,000. While a revisit to the November low of approximately $15,000 is possible, it represents a minimum expectation within this scenario, as final bear market lows tend to exhibit heightened volatility.

Conclusion

With record-low trading volumes and inactive BTC whales, Bitcoin has remained trapped in a range since mid-August, initially dropping by 14%. Surprisingly, this decline didn’t spur increased trading activity, casting doubt on the current Bitcoin price’s legitimacy and resilience.

The bearish chart outlook, coupled with profitable long-term holders, raises the possibility that whales may reappear to capitalize on their gains by selling their holdings.

If this occurs, it could lead to a more significant and dramatic decline in Bitcoin‘s price, potentially approaching the $11,000 mark. What’s clear is that Bitcoin urgently needs a decisive catalyst to revive trading volumes, yet such volatility remains elusive. Perhaps a substantial macroeconomic event will be the trigger, and given the prevailing uncertainty, it’s only a matter of time.

Disclaimer

Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.