Bitcoin Trading Volume Declines Even as Prices Soar Near All-Time Highs

• Bitcoin trading volume is declining despite soaring prices.
• Current market shows a cooling phase according to analysts.
• Long-term holders are driving the current price movements of Bitcoin.
• Only 25% of Bitcoin supply is liquid, creating future supply challenges.
• Lack of retail investor excitement may indicate a shift in focus.

Bitcoin price highs versus declining trading volume

Bitcoin has been hovering at astonishing levels, recently crossing above the $100,000 threshold for a sustained period. Surprisingly, this impressive price rally hasn’t sparked equivalent enthusiasm in spot trading volume. Unlike the bullish market trends seen in the past, this time around, the active trading hasn’t surged in conjunction with Bitcoin’s price climbing near its all-time high, raising eyebrows among investors and analysts alike.

Market cooling signals require investor patience

The apparent divergence between Bitcoin’s price and trading volume is troubling. Investors have taken note of this unusual trend as recent data from CryptoQuant and Glassnode reveals insights into the market’s current state. Dan from CryptoQuant termed this phenomenon as a ‘cooling’ period, illustrating that the associated high trading volume typical in bull markets is absent, which in this case, indicates a more settled and hesitant market instead of one driven by speculation. He brought attention to a chart depicting that the trading volume’s size is represented by the circles’ diameter while their colours denote growth rates — with green circles dominating, suggesting a preference for a more patient approach rather than a rush into trading activities.

Accumulation strategies dominate current investor behaviour

Additionally, according to Glassnode’s Week 25 report, the recent surge to beyond $100,000 is distinctly different from previous peaks. Unlike the vigorous rallies experienced in 2024’s second and fourth quarters, the current price incline hasn’t been met with an increase in spot trading volume. This reflects a significant reduction in speculative activity among investors, as they seem to favour accumulation strategies. The current spot trading activity stands at around $7.7 billion which is shockingly low compared to previous peaks, reiterating the hesitancy in the market and reinforcing a prevailing narrative of consolidation.

Declining liquid Bitcoin supply impacts market dynamics

Another critical element at play here is the declining liquid supply of Bitcoin itself. Recent statistics reveal that only about 25% of Bitcoin’s total supply remains liquid, with a staggering 75% controlled by illiquid holders — typically long-term investors or institutions that don’t plan to sell. Nic, a co-founder at Coin Bureau, pointed out that the illiquid supply of Bitcoin continues to rise, reaching new heights. This creates a curious scenario where the reduced number of available coins on the market means even slight increases in demand can lead to significant price hikes, which seems to explain Bitcoin’s sustained position near its all-time high despite a dip in spot trading volume. It appears that the measure of enthusiasm from retail investors, which typically fuels bull runs, is lacking, marking a shift towards a more restrained investment strategy focusing on long-term value rather than immediate profit.

In summary, Bitcoin’s soaring price nearing its all-time high stands in stark contrast to the shrinking spot trading volume, pointing towards an unexpectedly subdued market sentiment. Current trends highlight a shift to long-term holding strategies as opposed to speculative trading, accentuated by the significant reduction in liquid supply. Investors may need to adopt a more patient approach, keeping an eye on macroeconomic signals and waiting for opportunities that catalyze future trading activity and potential price surges.