Crypto trading volumes tumble to two-year low

Cryptocurrency trading volumes have plummeted amid a dreadful first half of the year for the industry.

Spot and derivatives volumes have declined across exchanges, falling more than 15 per cent since May to around US$4.2 trillion and reaching the lowest since January of last year. The month of June alone saw spot volumes drop nearly 28 per cent to US$1.41 trillion as Bitcoin tumbled, the lowest since December 2020, according to data compiled by CryptoCompare.

Meantime, derivatives trading volumes were off by 7 per cent during the month, the lowest since July 2021. Derivatives are hugely important in the crypto space, making up more than half of the market.

To market-watchers, the trend makes sense considering declines in Bitcoin and Ether, both of which have fallen over 70 per cent from last year’s all-time highs. Bitcoin tumbled 15 per cent on June 18 to US$17,599, the lowest price since late 2020. It reflects investors turning cautious.

“Volume has declined given the reduced excitement from investors in a cyclical bear market,” Katie Stockton, co-founder of Fairlead Strategies, said in a message. “Until crypto prices break out of their bear-market cycle, which could take months, we can expect volume to be below average.”

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Cryptocurrencies have, along with other riskier assets, had a hard time this year amid a higher-rate environment, whereby central banks around the world are trying to tamp down red-hot inflation. The MVIS CryptoCompare Digital Assets 100 Index of some of the largest coins is down 60 per cent this year. Bitcoin rose 2.8 per cent to US$20,208 on Thursday.

Bitcoin futures contracts last month at the CME, with volume of US$29 billion, reached their lowest volume traded since July of 2021, while Ether’s fell over 20 per cent, indicating a “fall in speculative activity,” according to CryptoCompare. The drop-off in trading volume has taken place across many platforms, including Binance, OKX and FTX.

The trend marks a reversal from the past two years, when retail investors, stuck at home during lockdowns or looking to capitalise on rising prices, swarmed into cryptos and other risky bets.