Transaction volumes have not been this low for more than two years. In the last quarter alone, they were reduced by 2.5 on centralized exchanges. Although significant, this fall in volumes does not affect all cryptocurrencies equally: altcoins are the biggest victims of this bear market.
The fall in transaction volumes
Despite the recent rise of Bitcoin (BTC) to $30,000, the cryptocurrency industry faces a daunting challenge: how to rekindle the flame of transaction volumes?
In one of its latest reports, the Kaiko company revealed data regarding transaction volumes in the cryptocurrency market. As a reminder, the trading volume represents the total amount of trades that took place on a given security.
Thus, according to the company specializing in data analysis, quarterly transaction volume lowest since fall 2020. Note that this graph is only based on data from 25 centralized exchanges, including Binance, Coinbase, Kraken and OKX to name a few.
Quarterly trading volume on cryptocurrency exchanges
With a volume of approximately 1.750 billion dollars per quarter, the cryptocurrency sector is far from having lost all its investors. However, the fall in these figures during the previous quarters testifies to the declining financial activity of the sector.
In effect, the volume of transactions has been divided by 4 since peaking at $8 trillion during the 2021 bull market. Similarly, between the first and second quarters of this year, those same volumes plunged -250%.
Volumes are regularly used in technical analysis, one of their main functions being to identify moments of euphoria and calm on a given asset.
Furthermore, these data demonstrate that the onset of the bear market scared off a number of investorsat the same time reducing the number of financial transactions on centralized exchanges.
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Altcoins on the bench
To obtain a more precise examination the situation in the cryptocurrency marketan analysis separating the two largest assets in the sector (BTC and ETH) and altcoins must be carried out.
As of this writing, investor interest is focused on the two stocks with the largest market capitalization, namely Bitcoin and Ether. Over the past year, their dominance in the cryptocurrency market has increased significantly : that of ETH rose from 15% to 20%, while that of BTC recorded an additional 8%, thus settling at 51%.
Dominance of Bitcoin in the cryptocurrency market for a year
In the cryptocurrency market, dominance is a tool that provides an overview of which assets investors trust. The rise in dominance of the two largest cryptocurrencies in the world demonstrates that investors are moving away from altcoins to assets considered more reliable.
Regarding other cryptocurrencies, with the exception of a few narratives and other outsiders, the majority of them did not benefit from the successive rises of Bitcoin and Ether.
While the latter managed to compensate for their losses made after the fall of FTX, altcoins remain in a downtrenda situation made worse by recent rhetoric from the SEC regarding some of these assets as financial securities.
Evolution of cryptocurrency market capitalization over one year, excluding ETH and BTC
Over the last 12 months, bitcoin surged 57%, while Ether stands out with a growth of 76%. For their part, altcoins are struggling to recover: after one year, their total capitalization has decreased by 5%.
As a result, interest around cryptocurrencies is uneven between different assets: during the current bear market, altcoins, considered the riskiest stocks on the market, are abandoned in favor of BTC and ETH.
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Sources: Kaiko, TradingView
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Always enthusiastic about new technologies, I gradually moved closer to Web3-related activities during the year 2021. Over time, I wanted to add my stone to the building. It was then that I became an editor, with the aim of explaining cryptocurrency-related topics to as many people as possible.
Timothy Bourbotte
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