Searcher Kevin Rooke noted that the daily transaction volume on the Bitcoin network hit an all-time high of $ 29 billion on Sunday.
Rooke also pointed out that there were only 5 days in Bitcoin’s history when the network moved above $ 20 billion. Three of which took place this week.
But what does this mean, especially in the context of current market conditions?
Is Bitcoin About To Bounce Back?
Recently, a confluence of factors has increased selling pressure in the stock and crypto markets. Most notable is the ongoing $ 300 billion liquidity crisis at Chinese real estate giant Evergrande.
Chinese regulators also last week renewed efforts to crack down on all cryptocurrency transactions, including mining activity.
Bitcoin hit $ 39,700 on September 21, after falling 25% from its local high of $ 52,800. Since then, it has been trading in a narrow range, with $ 45,100 marking the peak.
Nonetheless, today the BTC price in $ has moved above the support level of $ 40,750. And a clear break above $ 42,000 in the early hours (GMT) demonstrated the bulls’ willingness to keep the momentum going.
Typically, technical analysts see rising prices with rising volumes as trend confirmation. But is this what we see with Rooke’s data?
“If the price volatility is accompanied by a high volume of transactions, we can say that the price movement has more validity. Conversely, if a price movement is accompanied by a low trading volume, it may indicate a weakness in the underlying trend.
Is it a hot air charge?
Volume refers to each transaction between a buyer and a seller. A transaction occurs when a buyer agrees to buy what a seller is offering. If five trades take place in a day, the volume for that day is five.
The trade volume is the above scenario taking into account the price of the asset at the time of the trade.
Therefore, Rooke’s data, in which transaction volume has reached an all-time high, cannot be taken as trend confirmation as this metric includes price as a variable.
Additionally, using recent transaction volume to compare past activity is somewhat flawed as the 2021 median price of $ 46,800 is much higher than in previous years. Hence, it skews any kind of comparison to times when the price of $ BTC was much lower.
A look at actual volume, not transaction volume, shows a downward trend over the past ten days. This has been accompanied by a slight uptrend in price which has so far failed to retest the previous resistance at $ 44,900.
The rise in price with the fall in volume indicates a weak uptrend and a possible reversal on the charts.
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