Bitcoin trades at five-year low, but value remains strong

Trading activity in August has fallen by over 94 percent compared to March this year.
Ameya Paleja
Artist's rendering of a Bitcoin
Artist's rendering of a Bitcoin


Far from its all-time high values, cryptocurrency Bitcoin is failing to attract interest from traders, as per a recent report of trading volumes at crypto exchanges, CNBC reported. An analysis conducted by a data analytics firm found trading volumes were at an all-time low in five years, matching those of the pre-pandemic years.

The interest in Bitcoin surged during the COVID-19 pandemic as the world economy came to a grinding halt. As investors looked to park their funds in rising assets, Bitcoin became a top favorite, and its valuation soared to all-time highs of over $68,000.

Countries like El Salvador adopted Bitcoin as an official currency and even distributed it accessible to citizens willing to experiment with it. However, as the wheels of the global economy began turning again, Bitcoin lost its sheen, and its value plummeted. So has investor interest in it.

Bitcoin trading volumes

Data analytics firm Cryptoquant analyzed numbers from the spot and derivatives market for Bitcoin and found that the cryptocurrency trading volume was 129,307 BTC last week. Earlier this month, the volume dipped to 112,317 BTC, the lowest since November 2018.

The dip in the trading volume is pretty sharp, considering that just in March this year, Bitcoin trade volumes were around 3.5 million and dropped nearly 94 percent in the following months.

Cryptoquant's head of research, Julio Moreno, told CNBC that these numbers were typical of bear markets where retail investors were deserting an asset and volumes could pick up as one entered a bullish phase.

Will Bitcoin pick up again?

Bitcoin trades at five-year low, but value remains strong
Bitcoin value stays strong though its has plummeted from its all time high

Toward the end of last year, US regulators came down heavily on crypto exchanges, which saw FTX collapse and Binance being sued later. A banking crisis in May led investors to avoid risky assets like cryptocurrencies, which also saw a Bitcoin sell-off in mid-August.

Trading volumes have remained low since. Experts believe that trades will pick up again after the next halving of Bitcoin rewards, expected in April or May next year. If there were any solace from this episode, it would be the value of Bitcoin, which is hovering around $26,000, an improvement over last year's pricing.

Cryptocurrencies do not take very long to crash and lose all their valuation, and Bitcoin's gaining strength is a sign of the faith that investors continue to show in the world's most popular crypto coin.

Experts told CNBC that the long-term view of cryptocurrency as an alternative asset continued to be held, and many continued to remain invested in Bitcoin, even though there wasn't any trading activity visible on the ground.

Possibilities of a significant shift in the near term remained low as markets are not seeing much liquidity and are waiting for a catalyst before making big moves. This could happen through approvals from the US Securities and Exchange Commission (SEC) for Bitcoin-related exchange-traded funds.

Long-term investors haven't sold off their Bitcoin, so the interest in the cryptocurrency remains, even though it isn't how it was at the pandemic's peak.

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