Analysis: Cryptocurrency trading volume falls to a low in 2024, spot demand weakens

Analysis indicates that with the contraction of liquidity and a decline in risk appetite, the spot trading volume in the crypto market has significantly dropped, and investor participation has noticeably weakened. Data shows that the spot crypto trading volume on major exchanges has halved from about $2 trillion in October last year to $1 trillion by the end of January, falling back to a low range since 2024.

CryptoQuant states that since October, spot demand has continued to cool, and the market adjustment has largely been triggered by the liquidation event on October 10. The current price of Bitcoin has fallen about 37.5% from its October peak, and tightening liquidity has further compressed trading volume. For example, Binance's monthly spot trading volume for Bitcoin has decreased from about $200 billion in October to the current $104 billion.

In addition to weak demand, market liquidity is also under pressure. Analysts note that the continuous outflow of stablecoins from exchanges, combined with a reduction of about $10 billion in the total market cap of stablecoins, has further weakened the buying base.

On a macro level, institutions believe that short-term risks still lean towards the downside. The research director at Arctic Digital points out that the market's hawkish expectations regarding Kevin Warsh potentially becoming the Fed Chair may imply a slowdown in interest rate cuts, a strengthening dollar, and rising real interest rates, thereby putting pressure on risk assets, including crypto.

However, some analysts still believe that the current adjustment helps to clear leverage and cool speculation. If there is a subsequent inflow of funds into Bitcoin ETFs, progress in crypto-friendly legislation, or weakening economic data prompting a shift towards looser monetary policy, the market may welcome a new rebound window.