What is cryptocurrency volume?



29 listopada 2021
What is cryptocurrency volume?

What is cryptocurrency volume?

Despite being a difficult environment to navigate, the cryptocurrency market is attracting more and more investors. The promise of simple, quick and effortless profit tempts more people who, disregarding nothing, put further sums of money into unknown assets. Cryptocurrencies, like stocks on the stock market, are characterized by great dynamism and volatility. One day the price can be high, the next it can fall by up to 70-80%, because they have no connection to existing physical assets. For this reason, it is advisable to first familiarize yourself with the basics, which are volume and technical analysis and their importance in the cryptocurrency market.

Technical analysis

In order to understand what volume really is, it is worth first explaining the issue of technical analysis. It is nothing but techniques that allow you to study the dynamics of the cryptocurrency market. This means that thanks to them you will not only scrutinize the situations that have already happened. First of all, based on them, you are looking for a pattern with the help of which you will be able to predict the next behavior, that is, the decreases and increases in the prices of individual cryptocurrencies. This allows you to find the market configurations that will bring the highest profit, that is, the moments when it is best to sell or buy the selected assets. Technical analysis shows all relevant factors in the form of a chart.

Cryptocurrency volume - what is it?

Volume is a value that represents the degree of activity of traders, their propensity to make transactions - how often they bought or sold a particular cryptocurrency in a particular stretch of time. It is one of the most important indicators, thanks to which technical analysis can be complete. On a histogram, it is usually presented in the form of bars - red indicates a decrease in price and green an increase, while the height of the bar represents the volume.

Volume shows the intensity and validity of trends in the market. While some may downplay its contribution to technical analysis and its impact on smaller traders, understanding volume allows you to see the source of price movement and the points at which serious traders with large amounts of capital came into play. In practice, for smaller investors, high volume also means that they are more likely to find someone willing to buy their assets.

In addition, the analysis of candles on the histogram allows to draw a conclusion if the increased interest will last for a longer period of time or if it is only temporary and higher prices are just an unsupported action. Therefore, a downward correction of previous highs must also be taken into account. In case the downward candle remained high or slightly lower than the upward candle, it means that the bought assets have made profits.

Why is volume so reliable?

Volume is one of the more truthful values because it shows the actual movement in the market. Just as the buying and selling process can be manipulated, volume cannot. Volume is one of the most truthful values because it shows the real movement in the market. Just as the buying and selling process can be manipulated, volume cannot. It allows you to verify any kind of price increase or decrease - if one of these situations occurs, but the volume remains constant, it means that the movement was artificially generated. This is done by people who want to sell assets at cost or have activated defensive orders.

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Attention! The above article neither in whole nor in part constitutes a "recommendation" within the meaning of the provisions of the Act of July 29, 2005 on trading in financial instruments or the Regulation of the European Parliament and of the Council (EU) No. 596/2014 of April 16, 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6 / EC of the European Parliament and of the Council and Commission Directives 2003/124 / EC, 2003/125 / EC and 2004/72 / EC and Commission Delegated Regulations (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65 / EU of the European Parliament and of the Council as regards organizational requirements and operating conditions for investment firms and defined terms for the purposes of this directive. The content contained on the website does not meet the requirements for recommendations within the meaning of the above-mentioned act, incl. do not contain a specific valuation of any financial instrument, do not rely on any valuation method, and do not identify investment risk.

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