When it comes to Bitcoin volume, there are a few different metrics we can track. The most obvious being total trading volume across all exchanges. However, there is one thing to keep in mind about this number; the reported trading volume vs the real trading volume.
It is common knowledge in the crypto space that reported trading volumes on many exchanges are fake. Many of the less popular exchanges use tactics like wash-trading to inflate volume numbers to attract traders and pump coins. This is an illegal practise in traditional markets.
According to Messari, the reported trading volume currently is $38,265,113,068.80 and the real trading volume is $3,677,134,686.82. That’s a massive difference, 10.4x to be exact. Regardless, the trading market around Bitcoin is very liquid when we compare it to popular stocks like Apple which does $140,935,022 in average daily volume according to Yahoo Finance.
Above we can see the Bitcoin transfer volume since 2016. Glassnode defines the transfer volume as, “The total amount of coins (USD Value) transferred on-chain. Only successful transfers are counted.”. This metric includes trading or transacting Bitcoin as well as transferring between wallets which could be owned by the same person. We see a peak in late 2017 at the time of the last bull market. As well, a massive peak and sharp fall during the time President Xi acknowledged Bitcoin as a store of value. Currently were seeing these levels trending higher as the next Bitcoin bull market begins.
Bitcoin Futures Volume
Bitcoin also has a derivatives market. Most exchanges offer Bitcoin futures trading. This means that instead of taking possession of the Bitcoin when the trade is made, the trader is buying or selling a futures contract. It sounds complicated but realistically it’s very similar to spot trading. This is also a high growth market for Bitcoin.
Coingecko is currently tracking thousands of Bitcoin markets. I tried to get the exact number but it was taking forever to view the whole list (I got to 2000). This includes all major fiat currencies, most, if not all cryptocurrencies, and even some commodities. Let’s not forget that PayPal has now opened up a Bitcoin market and banks have been given the green light in the US.
An interesting metric that IntoTheBlock provides is the location of the volume. According to IntoTheBlock, “This metric is calculated by comparing the number of transactions that take place between 10:01PM to 10:00AM UTC (Eastern times) versus the transactions that take place between 10:01AM to 10:00PM UTC (Western times).”. Over the last 14 days the west has been leading the way with Bitcoin transactions. If you look at the all time numbers, they’re consistent with the last two weeks as well.
This information can be useful for active traders that might want to set stop losses or take profit targets when going to sleep and expecting spikes in volume from the other side of the world.
Net Flow Volume
Net flow volume is the difference between Bitcoin flowing into exchanges and out of exchanges. This is important to track because if we notice many Bitcoin whales starting to deposit onto exchanges that could mean a few different scenarios.
According CEO of Crypto Quant Ki Young Ju, this could mean three possible outcomes:
Whales are looking to buy alts using BTC which means an ‘Alt Season’
Whales are looking to dump Bitcoin which can crash the price
Whales have no intentions yet but want to keep it on exchanges for emergency purposes
CryptoQuant.com @cryptoquant_com$BTC All Exchanges Inflow Mean surged to 32 BTC (23:37 UTC / Dec 01, 2020) Chart 👉 https://t.co/TEVdEMc5Lb https://t.co/8aL9hP9axu
Vice versa also applies to Bitcoin flowing off exchanges. This could mean whales are accumulating and holding for the next bull run. A great buying opportunity.
We can track net flow volume with Glassnode.
We can see within the past week there has been a spike in net flow volume. This can indicate volatility is coming to the market so traders must be cautious and use proper risk management.
Let’s connect on Twitter. Looking forward to hearing your thoughts and feedback.
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Resources I Use
I use Glassnode for all the metrics I track on the Bitcoin network. Their platform is extremely user friendly and fun to use.
Binance is the main exchange I use to trade the crypto markets.
Trading Alpha has built their own indicators that provide buy and sell signals for crypto and equities trading.
I use Tradingview daily to analyze trading charts and find areas of support and resistance.