Bitcoin Trading Volumes Have Collapsed – Here’s What It Means For BTC Price?

Bitcoin trading volumes have collapsed in recent days. According to data obtained from CoinGecko, daily Bitcoin trading volumes across major exchanges fell to as low as $14.5 billion on Monday, the lowest level since the 5th.^th of March.

That’s a big drop after daily trading volume for Bitcoin rose as high as $70 billion earlier in the month, the highest level since the aftermath of the FTX collapse last November.

The drop in trading volume is worrying.

That could indicate that investors’ appetite to buy Bitcoin is at current levels in the $27,000s, as US regulatory concerns increase and fears of a US banking crisis subside.

That could be a result of reduced fiat-to-crypto on-ramps in the wake of the collapse of crypto-friendly banks in the US earlier this month (especially the Silvergate collapse).

Worryingly, the decline in Bitcoin volumes earlier this month continued a sharp but ultimately short-lived drop from the mid-$22,000s to sub-$20,000 levels.

Bitcoin bulls will hope that BTC does not experience a similar drop from current levels to key support in the $25,000 area.

Adding to bearish fears, recent weaknesses have been observed in various metrics that measure activity on the Bitcoin network.

CFTC’s Binance lawsuit weighs on volume

The drop in trading volume began before the announcement by the US Commodity Futures and Trading Commission of a lawsuit against Binance. But the lawsuit certainly won’t help matters.

Major market players and institutional players involved in crypto will be more wary of interacting with Binance if it is about to be labeled an unregistered/unlicensed exchange in the US.

And Binance handles the lion’s share of crypto trading volumes. According to data presented by The Block, Binance accounted for 62% of global crypto trading volume in February, a staggering degree of market dominance.

But that dominance has waned since they removed zero-fee trading for Bitcoin pairs.

Much has been made in the crypto space of the decline in Bitcoin’s so-called 2% market depth of late.

This is the number of buy and sell orders waiting to soak up liquidity on exchanges that are within 2.0% of the current price.

When the 2% market depth drops, this makes it easier for large orders to move the BTC price, making for a more volatile market.

Options investors remain uncertain about volatility risk

Despite the ongoing decline in Bitcoin’s market depth and sharp recent drops in trading volume, investors apparently remain quite aware of the risks of price volatility. That’s the message from options market prices, anyway.

Deribit’s Bitcoin Volatility Index (DVOL) has retreated from previous monthly highs of 73 in recent days and was last around 62.

That’s well above previous March levels in the 50s, but still quite low in historical comparison. Deribit is the dominant Bitcoin derivatives exchange.

While Bitcoin may be in for a bumpy ride in the short term, many analysts believe Bitcoin’s long-term outlook remains strong.

Read more: Bitcoin Bears Eye possible pullback to this key support area, but long-term BTC price outlook remains strong