Bitcoin breakout stalls with daily trading volume also tumbling

Cryptocurrency price increases have mostly stalled following two days of gains that had spurred optimism for a more sustainable rally.

Bitcoin, the largest token by market value, declined as much as 1.5 per cent on Thursday to once again trade around $20,000, a level it’s been stuck around for weeks. Ether was little changed, while an index tracking the 100 largest coins also fell.

“After a two-day reminder of the potential for crypto markets to rally, momentum has taken pause,” Genesis analysts wrote in a note.

Interest in crypto has waned amid a slump in prices that’s seen Bitcoin lose 70 per cent from its all-time high of near $69,000 in November. Retail investors, in particular, have been disenchanted by the asset class. They’ve not been wading into the market in the same way they did during the first two pandemic years, with Google searches for the word “crypto” falling to the lowest levels in the past year.

Dogecoin on Thursday, however, was again posting some of the biggest gains among the thousands of tokens available for trading. The Shiba Inu meme coin that was initially launched as a joke has increased about 30 per cent since Monday. Tesla CEO Elon Musk, an ardent supporter of the Doge token, which traded around 8 cents, pledged to close his acquisition of Twitter by Friday. Musk has talked about using cryptocurrency as a payment method for social-media platforms.

Meanwhile, institutional digital-asset products this month saw their lowest-ever volume in data going back to June 2020, with average daily trading volume dropping 34 per cent to $61m, according to CryptoCompare.

“This paints a bleak picture for crypto-based institutional products, as the macroeconomic climate still possesses much uncertainty,” a note from the researcher said.

A surge in prices earlier this week rekindled hope for digital-asset advocates that the crypto winter was thawing. Cryptocurrencies, like other riskier investments, have been suffering in a tighter-monetary-policy environment where the Federal Reserve is raising interest rates aggressively to tamp down inflation. But given that prices have been mired in a slump for months, interest has remained low. The proportion of Bitcoin that has been held for one year and over is at an all-time high, with more than a quarter of total supply now not having moved on-chain for at least five years, according to Genesis.

The amount of Bitcoin that hasn’t moved in over a year reaching a record of over 66 per cent this week means that there’s “less and less BTC readily available to new entrants,” said Noelle Acheson, author of the “Crypto is Macro Now” newsletter.

But there are plenty of other signs investors remain uninvolved. The 14-day moving average of perpetuals volumes, as measured via FTX, reached its lowest point since the start of 2021, according to data compiled by Strahinja Savic at FRNT Financial.

And the drop in derivatives volumes has come alongside a slump in spot volumes. Savic points out that the 14-day moving average volume of BTC/USD on the crypto platform is also at its lowest since April of last year.

“The fact that we are seeing perp volumes taper off, paired with low Google search levels, suggests that retail traders have pushed a bit of a pause button in participating in crypto,” he said.