Is Bitcoin Crashing soon due to Low Traded Volumes?

Bitcoin (BTC) currently faces a critical juncture, as demand for the digital currency wanes despite its recent ascent above the $28,000 mark.

The ongoing bearish landscape fails to offer substantial support to the current price trajectory of the digital asset, increasing the potential for additional downturns.

A recent study by CryptoQuant provided insights into the present circumstances. The analysis highlighted that Bitcoin’s initial surge was driven by a surge in market demand, which seems to have significantly tapered off.

Influence of Trading Volume on Bitcoin’s Price Surge

Data drawn from Bitcoin’s exchange trading volumes reveals that the initial price rise this year was bolstered by a significant increase in BTC trading volume across spot and derivative exchanges.

Of particular note, BTC made a remarkable leap from an initial price of $16,541 at the start of the year to an impressive $26,386 by March. This represents a significant 59% increase within just three months. Evidence suggests that Bitcoin’s trading volume witnessed marked growth on both spot and futures exchanges during this period.

Is Bitcoin Crashing?

During the price rally, the spike in demand acted as a buffer against possible price corrections. However, after BTC surpassed the $26,000 mark, trading volume on spot exchanges saw a substantial dip. Yet, the high volume on derivatives exchanges provided enough support for the digital asset to achieve the $30,000 landmark in April.

Depleting Demand on Futures Exchanges

The CryptoQuant report indicates that demand on futures exchanges has also dwindled, leaving Bitcoin in a demand deficit. This lack of demand leaves the digital asset susceptible to further drops if bearish trends gain control.

Bitcoin Recaptures $28,000 Mark After a 20-Day Gap

This demand shrinkage coincides with Bitcoin’s recent recapture of the $28,000 level after a 20-day gap. The month of May has been a test for BTC, as it has been striving to resist further dips below the $25,800 line.

Bitcoin’s journey through May started at $29,233, but by May 12, it had fallen to $25,811, registering an 11.7% drop in less than two weeks. The digital currency bounced back from lows beneath $26,000 but has grappled to stay above the $27,000 line.

On May 28, following a significant 4.51% gain, BTC managed to recapture the $28,000 level, as reported by crypto.news. Nevertheless, subsequent dips resulted in its current value sitting at $27,786 at the time of writing. Despite these recent swings, Bitcoin has managed to register a 3.4% rise over the past week.