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Low spot and derivatives volumes suggest crypto is in a downtrend

When the crypto market enters a bearish spiral, traders often check if trading volume will increase to support the current price. Spot market volume has continued to decline since Bitcoin and several altcoins hit all-time highs (ATHs) in the second week of November.

According to the data, trading volume on the spot market has been declining month-on-month since November.

Source: CryptoCompare

While trading volume hit $1.4 trillion in November 2021, it was just $1.04 trillion in December. For the first 23 days of January, that number now stands at $593 billion.

While spot market volume in November was larger than the three weeks in December and January, it’s still only half the $2.23 trillion recorded in May 2021. Daily trading volumes on exchanges also showed similar signs, being lower than two months ago.

Source: coin jar

On November 2, 2021, $53.27 billion was traded, while on January 22, 2022 it was only $24.65 billion. While monthly and daily spot market volumes have declined, so have derivative markets such as futures and options.

Source: coin jar

When Bitcoin hit an ATH of $69,000 on November 10, 2021, $28 billion was recorded in BTC futures the next day. Indexes as of Jan. 22 show $14.64 billion in open interest (OI) recorded across a variety of exchanges.

In terms of bitcoin futures, the volume traded in October recorded a level of $1.94 trillion, higher than in November, and this month that figure is only $1.08 trillion. Total open interest and volume tied to bitcoin options has also been declining monthly over the past two months.

Overall, the low trading volume in the spot markets for cryptocurrencies and derivatives has had a negative impact on the crypto economy. Elevated volume usually indicates an uptrend, but that has not been the case lately.

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