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Trading Volume Meaning

Aug 2, 2023 | Updated Aug 2, 2023
Trading volume in crypto refers to the total amount of funds flowing in and out of a specific cryptocurrency or the crypto market over a given period.

What is Trading Volume in Crypto?

Trading volume measures the total amount of funds flowing in and out of either a specific cryptocurrency or the crypto market over a given period of time. It combines all successful trades on centralized and decentralized exchanges.  It can be calculated for not only cryptocurrencies, but also other assets like stocks, bonds, and fiat currencies.

This indicator can offer users insights into the movement of a cryptocurrency to predict future price and demand. Investors in the crypto market use this indicator to gauge the market sentiment and to determine the value of an asset. When calculating, you can measure it in the trading asset or in a fiat currency. For example, if you buy 5 BTC for $1000 on an exchange, the trading volume can either be $5000 or 5BTC. 

For stocks, it is measured by the number of individual stocks that were traded in a time period. If 50 shares of that stock are traded in a day, the trading volume for that day will be 50 shares.

What Does Volume Mean in the Crypto Market?

This indicator gives a better understanding of an asset’s trend. If an asset’s price moves in a direction and it is backed by a high volume, investors tend to believe that the trend is valid. If the volatility in price is backed by low trading volume, it may indicate a weak or unsustainable trend. 

When evaluating the overall health of the crypto market, a bullish market should see an increasing trading volume. This would mean that there are enthusiastic buyers in the market with potential for further price growth. When a bearish market has a high volume, it means more people are selling off assets and a depreciation in asset price could follow. 

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