Along with the market’s capitalization and constant circulating supply, the volume is one of the most critical and prominent gauging metrics in the cryptocurrency universe. As a cryptocurrency trader or investor, you must learn how to identify and calculate early-stage cryptocurrencies that may have a higher probability of success, before anyone else can realize their potential and the whole market starts going berserk.

It is your responsibility to look at cryptocurrency trading volumes before you shortlist the trading opportunities for further investments. However, let us first breakdown for you the importance of volume and why trading volume is such a critical metric to analyze cryptocurrency. We will also explain how it can help you become a successful trader in the cryptocurrency domain.

Why Trading Volume?

The volume of a cryptocurrency that is listed on CoinMarketCap is relatively simple. It is the value of the coin that has undergone trading within the last 24 hours or so. For example, if there were $3.5 billion worth of any Bitcoin or any other cryptocurrency that changed hands in the last 24 hours. You can break this process down in a variety of ways. It is Bitcoin you can also list is as 3,039,787, 668 in Euros, or crypto terminology, you can list it as 642,566 Bitcoins.

You can also dice and slice it by exchange, such as may be in the last 24 hours, roughly 15.2% of all Bitcoin currency was traded via Bitfinex or some other exchange, where the price value of the Bitcoin stood at $5514. In short, volume essentially depicts the number of people selling or buying cryptocurrency coins. If the price of a cryptocurrency goes up, then it shows an increase as hefty volumes and tells us what the current trends are and where the crypto-users are inclined to moving.

Therefore, it will be highly likely that the trend will continue, and you can use this as an indication of where to put your money in for a profitable investment. Similarly, if the price of the Bitcoin or other cryptocurrencies drops, it will indicate that there is a very low or minimal volume in the market. This is also an indicator that not a lot of the people in the cryptocurrency world are backing the trend.

From volume, you can interpret some much information, movements, and direction or any cryptocurrency coins. It is an essential gauging metric in the cryptocurrency trading business. You can examine volume in minute details. You can track any coin’s volume in the CoinMarketCap not only in the last 24 hours but the last week, or even the last month. It also helps you gauge if the current coin’s value swing is expected behavior or it is something alarming, and you should move quickly in your decision making to buy or avoid.

If a coin is displaying frequent massive swings in volume, it will not attract any attention or raising eyebrows if the volume is high. However, lower volumes and massive swings in the last 24 hours will indicate that there is some trend shift, and some are supporting that particular currency coin the way it is developing volume.

You can even gauge which of the cryptocurrency exchange has what volume. It is essential because each exchange keeps swinging and has its own price difference from other exchanges when it comes to different types of cryptocurrencies. Additionally, there are many exchanges out there that are geographically focused on their local users. For example, Kraken is an exchange primarily focused on European cryptocurrency users. OKCoin operated from China until the People’s Bank of China cracked down in recent times. The volume of any exchange can show where are sellers and buyers of the coins are from.

Generally, the most popular and the biggest in volume cryptocurrency coins are traded the most in the digital world. If you try to sort the volume of the cryptocurrency coins in the exchanges, you will find that the top three coins are Bitcoin, Ethereum, and Ripple. They are also three of the largest cryptocurrencies in the world by market caps – no surprise on that front.

However, let us slide down to the lower spectrum of the cryptocurrency world, and you will see MonaCoin, the lesser-known currency – you may even be hearing it for the first time, to be honest. It does, although, have higher trading volumes compared to other more prominent names like Dash and Neo.

MonaCoin may not be the talk of the town amongst the crypto-users and traders, but it has seen a remarkable and astounding change in some of its volume amounts. There was a time when its volume reached 86.97%, and this high trading volume attracted plenty of attention from cryptocurrency users from all over the world.

Crypto Volume and Calculation

Cryptocurrencies are entirely different from established securities and traditional currencies in the world. Therefore, you may find comparing metrics to be limiting in their usefulness. Learning all the metrics is critical for you to evaluate the potential of investment into any particular cryptocurrency. One of the most important ones is the trading volume of the cryptocurrency that investors, especially the new ones, must focus on.

Remember, trading volumes can make or break your crypto-trade. Therefore, it is essential o know when to invest and when to let the opportunity pass for an investment that does not have everything it should be. How to calculate the crypto volume and the importance of volume, this is what we are going to help you find out next.

How Is Crypto Volume Calculated And Measured?

The amount of cryptocurrency activity generally measures the volume in the last 24 hours. As an investor, you must always keep in mind that there is a general trading volume in the cryptocurrency, and then there is a trading volume of a coin on a crypto-exchange. The general trading volume takes aggregated data of a coin’s performance from exchanges into account. Some exchanges may have more volume than others in comparison, making it easier and ideal to trade that asset.

What is Trading Volume Calculation Important?

Gauging cryptocurrency trading volume is critical in identifying whether that particular cryptocurrency is a healthy investment or not. A token or coin may appear good on paper, but if it has had no trade, then it could be disastrous to deal in. Assets with lower volume may indicate towards a dead project, and sometimes crypto-exchanges even de-list many dead-end projects. You may also be able to use unusual trading volumes to help you identify the investment opportunity in a cryptocurrency.

Trading Volume example

John has been observing a particular cryptocurrency coin for a while, and he starts to notice there is a pattern to its volume. The trading volume of the coin is rising steadily, and John takes it as a sign to begin buying this cryptocurrency tokens. He takes his position for a reasonable price, and all of a sudden, within a few days, the volume for this cryptocurrency coin explodes, and the price goes up.

John continues to watch the chart to stay focus, and he soon realizes that the price of these tokens is now starting to fall. He has a feeling that the asset’s value price will not be supported by the volumes currently showing, and he starts selling his tokens to take his profits out in time. So now you see how dynamic trading volumes can be, one week they were on a high, the next they were falling due to lack of demand. John was able to not only gain but preserve his profits by identifying the importance of volume in cryptocurrency trading.

How Do You Analyze the Crypto Volume?

Almost all of the cryptocurrency exchanges will be able to display the trading value of the cryptocurrency on their platform. However, it can be misleading at times. For many cryptocurrencies in the market, the major chunk of their trading volume is always dedicated or limited to just a few or even one single cryptocurrency platform. It means you may not be getting the whole picture because the higher volume and profits that you observe may only be limited to that particular platform, and you may not even get anything closer to that price anywhere else or a different platform.

Therefore, we would suggest that you use an aggregated tool to get a full comparison of the trading volume of the cryptocurrency tokens or coins across all exchanges. Compare its volume to its own timelines as well as other cryptocurrencies as well, so you know that the price and volume are sustainable, and the opportunity you are seeing is for real.

How Are Cryptocurrency Prices Connected to Trading Volume?

Large volumes mean more interested investors. If a volume supports a certain price level and the traders rushing in to book the order, then the price is highly likely to go up and become profitable for any investor who gets in on time. Similarly, if the volume goes down, that will mean no one is showing interest in the market is losing interest in that investment opportunity, which will decrease the price of that particular cryptocurrency coins or tokens.