What is trading volume in crypto?

When you view cryptocurrencies on an exchange or price chart, you often see trading volume. This figure shows how much of a particular cryptocurrency has been traded in a given period. Trading volume is an important part of market analysis and can help you understand what is happening in the market.

In the crypto world, volume is often used to determine how much activity there is around a particular cryptocurrency. High volume can mean many people are buying and selling, while low volume may indicate less interest or activity. In this article you will learn what trading volume in crypto means, how it is calculated and why it is an important part of market analysis.

In short

• Trading volume shows how much of a cryptocurrency is traded within a specific time frame.

• Volume is usually measured over a period such as 24 hours to give a current picture of the market.

• High volume can indicate strong market activity and significant involvement from both retail and institutional investors.

• Volume can help analyse trends by showing whether a price move is broadly supported.

• Traders use volume as a crucial indicator in technical analysis to filter out false breakouts.

What is volume?

Volume is a general term used in financial markets. It describes how much of an asset is traded within a given period. In traditional markets, volume can refer to the number of shares bought and sold in a day on an exchange such as the AEX or NASDAQ. In the crypto market, the same principle applies, but to digital tokens and coins.

When a cryptocurrency is bought and sold, that transaction is counted in the trading volume of the relevant exchange. The more transactions take place and the larger they are, the higher volume rises. Volume can be measured over different time periods, such as per hour, per day or per week. The most commonly used figure in crypto is 24-hour volume, because it gives a good average of global trading that continues day and night.

What is volume in crypto?

Volume in crypto refers to the total amount of cryptocurrency traded within a given period across all supported trading pairs. When you see that a coin has trading volume of 1 billion euros in 24 hours, for example, this means that 1 billion euros worth of transactions took place between buyers and sellers in that period.

This volume can consist of thousands or even millions of individual transactions of different sizes. Volume is shown on Coinmerce, price charts, market overviews and specialised crypto data platforms such as CoinMarketCap or CoinGecko. It helps users get a picture of how active and lively a particular market is at that moment. Without volume, a price is just a number; volume tells you how relevant that price really is to the rest of the market.

Why is trading volume important in crypto?

Trading volume plays an important role in understanding the crypto market. It can provide insight into how strong a price move is and how much activity is actually taking place behind the scenes.

Liquidity and market depth

An important aspect of volume is liquidity. Liquidity refers to how easily an asset can be bought or sold without strongly affecting the price. When a cryptocurrency has high trading volume, this usually means many buyers and sellers are active in the order book. Transactions can therefore happen faster at a price close to the market price. Markets with low volume can be less liquid, meaning a large transaction can have a disproportionately large impact on price.

Volatility and price movements

Volume can also directly influence a coin's volatility. When trading volume suddenly rises, this can coincide with strong price movements because the balance between buyers and sellers shifts. For example, when many people buy a cryptocurrency at once due to positive news, the price can rise very quickly. When many people sell at once, the price can fall sharply. Volume is therefore often used by analysts to better understand the sustainability of price movements.

How do you use trading volume in technical analysis?

In technical analysis, trading volume is used to analyse and validate trends and price movements. Traders look not only at the price of an asset, but also at the volume with which that price moves to determine whether the market is convinced of the direction.

Confirming trend direction

When price rises with increasing volume, this can be seen as confirmation of the trend. It means many market participants are willing to enter at higher prices, which supports the move. If price rises but volume stays low or even falls, this may indicate the move is weaker and the trend may be running out of steam due to a lack of new buyers.

Volume and trend reversals

Volume can also provide crucial clues about possible trend reversals in the market. When a trend weakens while volume falls, this can signal that the market is losing strength and a correction may be coming. Sometimes a sudden, extreme increase in volume at the end of a trend can also point to capitulation or a climax, which often heralds a change in overall market direction.

Volume on breakouts

A breakout happens when the price of a cryptocurrency moves through an important resistance or support level on the chart. Traders often look at volume to assess whether a breakout is legitimate and strong. When a breakout is accompanied by noticeably high volume, this may indicate many traders support the move and price is likely to continue rising or falling. Breakouts with low volume are often seen as less reliable and can lead to a so-called fake-out.

Indicators that use trading volume

In technical analysis there are various specialised indicators that use volume data to discover patterns.

On-Balance Volume (OBV)

On-Balance Volume is an indicator that combines volume with price movements over a longer period. The aim is to determine whether volume supports price by adding volume on up days and subtracting it on down days. When OBV rises while price rises, this can point to a healthy and strong trend.

Volume Weighted Average Price (VWAP)

VWAP stands for Volume Weighted Average Price. This indicator calculates the average price of an asset during the day, weighted by trading volume at each price level. Traders often use VWAP as a benchmark to determine whether an asset is trading relatively cheap or expensive compared with the average volume of that day.

Accumulation/Distribution indicator

The Accumulation/Distribution indicator tries to measure whether an asset is being quietly accumulated by large players or sold to the crowd. This indicator closely combines price and volume to determine whether there is accumulation, which often precedes a rise, or distribution, which often predicts a fall.

What can you use trading volume for?

Trading volume can be used for various practical purposes by both beginners and professionals. One of the main applications is assessing overall market activity. When a cryptocurrency has high volume, this means many people are trading the asset and there is a lot of attention on it.

Volume can also help analyse trends and filter noise in market movements. In addition, volume can provide insight into the popularity and viability of a new project. New projects with steadily rising volume may attract more attention from traders looking for growth potential. Volume is also universally used to assess liquidity; cryptocurrencies with high volume are simply easier and safer to trade for most users.

Trading volume vs liquidity

Trading volume and liquidity are often mentioned in the same breath, but they do not mean exactly the same thing in a technical context. Volume specifically refers to how much of an asset has actually been traded within a given period. Liquidity refers to the market's ability to execute an order without the price changing significantly as a result.

A market with high volume usually also has higher liquidity because there are many active traders, but this is not always guaranteed. For some smaller cryptocurrencies, volume can be temporarily very high due to a one-off event while the order book remains thin and liquidity therefore limited. It is therefore important to assess both factors independently.

Will trading volume in crypto keep growing?

The crypto market has developed rapidly in recent years and has become more mature. As more people and companies use cryptocurrencies daily, total trading volume may continue to increase in the long term. Institutional investors, such as pension funds and large banks, also play an increasingly important role in the market. Their participation often brings enormous amounts of capital, which can contribute to significantly higher volumes and better global liquidity.

In addition, ongoing technological development in blockchain and digital assets can lead to entirely new applications and markets we do not yet know. Although trading volume growth does not always go in a straight line and depends on market cycles, many analysts expect overall activity in the crypto sector to keep increasing in the long term as adoption grows worldwide.

Frequently asked questions

What is 24H volume in crypto?

24H volume refers to the total trading volume of a specific cryptocurrency in the past 24 hours. This figure shows how much activity has taken place in the market and is constantly updated to reflect the most current situation.

How much trading volume is good for crypto?

There is no fixed volume that is universally considered good, because this depends on the coin's market capitalisation. In general, higher volume is seen as a positive sign of more market activity, greater investor interest and better liquidity for trading.

Should you buy cryptocurrency with high or low trading volume?

Cryptocurrencies with higher trading volume are preferred by most investors because they are easier to trade without large price swings. Low volume can mean it is harder to sell your position quickly when you want to.

Want to discover how the crypto market works and how you can use volume in your own strategy? At Coinmerce you can easily buy cryptocurrencies and track all relevant market data. That way you can experience for yourself how factors such as price, liquidity and trading volume together shape the dynamics of the crypto market and expand your knowledge step by step.