Spot crypto trading volume on major exchanges has fallen from around $2 trillion in October to $1 trillion at the end of January, indicating a “clear withdrawal from investors” and weak demand, according to analysts.
Bitcoin (BTC) is down 37.5% from its October peak amid a liquidity drought and a slew of risk aversions, as volume contracts.
“Spot demand is drying up,” said On Monday, cryptocoin analyst Dark Faust added that the correction was “largely driven by the liquidation event on October 10.”
Since October, crypto spot volumes on major exchanges have halved, According to for cryptoquant. Binance, for example, saw $200 billion in bitcoin volume in October, and it’s now down to around $104 billion.
“This contraction in volume has returned the market to the lowest observed since 2024, leading to a clear withdrawal by investors in the crypto market and consequent weak demand.”
However, he said that’s not the only factor at play.
He added that market liquidity is also under pressure, as reflected by stablecoin exits from exchanges and a drop in the stablecoin market cap of about $10 billion.
Bitter medicine, but a necessary market move
Justin D’Anithan, head of research at Arctic Digital, told Cointelegraph that the biggest short-term risks for BTC over the next few months appear to be macro-driven.
“Uncertainty around Kevin Warsh’s hawkish stance as Fed chair could mean fewer or slower rate cuts, a stronger dollar and higher real yields, with all stressed assets, including crypto,” he said.
Related: Crypto Self Likely Due to US Liquidity Drought: Analyst
“I don’t think the narrative of BTC as a debasement/inflation hedge is over—Bitcoin was created to hedge against reckless monetary policies and very long-term currency shortages,” he said, taking the opposite.
“Strong ETF arrivals, clear pro-crypto legislation, or soft economic data that forces the Fed to return to easy policy” could create a meaningful recovery rally, D’Anithan said.
“It may be bitter medicine, but the recent move ultimately feels necessary and healthy to take advantage, end speculation, and force investors to rethink valuations.”
Not even close to the price of Bitcoin yet
Joao Wedson, founder and CEO of Fractal pointed out Those two things need to happen below the price of Bitcoin.
Short-term holders (STH) need to stay underwater, which is the current scenario, and long-term holders (LTH) “start taking losses”, which hasn’t happened yet.
He added that bear markets end only when STH realizes that the price falls below the LTH realization, and bull markets begin when it crosses above.
Currently, STH realizes that the price is still above LTH, however, a break below the key support at 74,000 could see BTC enter bear market territory.
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