According to CryptoCompare, the volume of trades on the largest exchanges dropped by 40 percent and more during June. The price of Bitcoin dropped to just under $29,000 and the daily volume fell over 42 percent from May’s intra-month high.
Following one negative story after another, cryptocurrencies are in the doldrums.
Trading volumes on the largest crypto exchanges, which count among their numbers Coinbase, Kraken, and Binance, fell more than 40 percent during the same period. The reasons given suggested lower prices and lower volatility.
According to the report, the price of Bitcoin bottomed out at a low of $28,908, ending the month down over six percent.
China’s Crackdown had Significant Impact
According to Reuters, China is a major catalyst. The countries latest effort to crack down on crypto mining, and there have been many over the years, appears to have had a significant impact. However, investors and industry experts still see a positive trend for Bitcoin and other cryptos.
Teddy Vallee, investment officer at Pervalle Global noted the crackdown by Chinese authorities has been the cause of considerable fear, fear which is appearing in the markets. Mr. Vallee went on to say that “The digital ecosystem just took a punch. As such, it is on the ropes rather than out scrapping in the middle of the ring.”
Vallee noted that when there are large sell-offs, the typical reaction of participants is to pull back. However, he is not seeing significant evidence from exchanges and funding rates remain negative.
What’s Behind the Slowdown?
Towards the end of June, China announced plans to launch a domestic, state-backed digital currency. As a result, the authorities ordered an immediate halt to crypto. This announcement led to the shuttering of crypto mining operations in provinces that were the home of upwards of 60 percent of Bitcoin’s mining power.
It became evident that, as miners prepared to leave the country, they were not making as many transactions with the Bitcoin they had mined to date.
In addition, the rapidly emerging ESG (Environmental, Social, and Governance) factors along with negative regulatory murmurings from the FATF (Financial Action Task Force) dragged the market sentiment down even further.
Nick Mancini, a research analyst for Trade the Chain, noted that once these stories began to move through the markets, sentiment dropped considerably. This drop to single-digits on a scale of 1 to 150 resulted in a drop of nearly half in Bitcoin trading volume since it peaked and a further drop of over 30 percent from its average a month ago.
Gabor Gurbacs is digital asset director at VanEck. He noted that summer does often result in lower volume, not only in crypto but in equities as well. Gurbacs also noted that investors may be feeling the pain after crypto lost a lot of its value this year to date.
He added, “The price of Bitcoin did climb to a high of $60,000 and Ether topped $4,000.” These events did bring considerable new interest and new investors into crypto, people that had yet had to weather a Bitcoin bear market.
Earlier this year, crypto hit all-time highs. As a result, people invested upwards and a lot of new investors got in at the top and lost money. Gurbacs added, “Half the market is gone, investors cannot expect similar volumes when the market consists of many new people who are spooked.
Volume is Still Up
Although the trading volume has dropped considerably, it remains higher than a year ago. Clara Medalie of Kaiko, a crypto market data provider, noted that although volumes dropped on almost every exchange in June they were still up on a year ago.
While the drop in June volume was steep when compared to May, it is not a fair comparison according to Medalie. She suggests that unprecedented liquidation led to the record volume.
Mancini sees a more bullish, not bearish, outlook for crypto. He expects volume and price volatility to return to past highs. He believes that with an increase in the number of institutions that are becoming involved in crypto trading as well as nations embracing Bitcoin as a currency and miners relocating to nations that are more democratic, that Bitcoin is poised for growth, not shrinkage.
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