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Cryptocurrency Trading Volume: what is it, and why is it important?

There are as many ways to trade as there are traders, and determining whether a particular investment path is right for you depends on many factors, such as the types of financial assets that best match your risk tolerance and income expectations, as well as your experience in the market and the amount of time you are willing to spend on managing your investments.

One of the asset classes that is gaining increasing legitimacy and popularity is cryptocurrency trading due to its accessibility, a variety of new and established currencies, powerful advanced encryption, and high volatility, which opens up profitable trading opportunities.

What is the trading volume in cryptocurrency investing?

Several fundamental indicators are used to evaluate cryptocurrencies and give an idea of the coin's trajectory. One of these indicators is the volume of circulating supply when the number of coins in circulation that are used and traded can affect the price, as this gives some idea of the liquidity of the token. Then, of course, there is market capitalization, defined as the volume of the circulating supply of the coin multiplied by the current price. Since digital currency developers do not publish financial statements, market capitalization is one of the few ways to estimate the present value of a digital currency.

Another important indicator is the trading volume, which is often used to assess the investment potential of an emerging digital currency. Trading volume is the amount of trading activity for a given asset. When it comes to digital currencies, trading volume is a record of purchases and sales of each coin. By how often the currency changes hands, you can judge its popularity and value.

One way to study trading volume is to focus on a specific cryptocurrency exchange, where trading volume is measured based on the number of transactions over 24 hours. Or you can study the total trading volume, which is calculated based on aggregated data from all exchanges combined. However, it should be remembered that the importance of public cryptocurrency trading may not reflect the whole picture since private transactions concluded on the OTC market may account for a large amount of coin activity. Cryptocurrency exchanges with the most significant trading volume provide the best opportunities because the more extensive the total trading volume, the easier it is for an investor to trade the selected coin.

Why is the volume of cryptocurrency trading so important?

If you want to assess the viability of a particular cryptocurrency, trading volume is key. Although the new coin may cause a lot of excitement, it may not have traded, which means that investors do not believe in this project. The cryptocurrency with the highest trading volume is the most reliable investment. High trading volume usually means more liquidity and stability. A low trading volume is a wake-up call for a coin at the bottom, and exchanges usually exclude a currency from the list if it is not gaining momentum.

On the other hand, for a promising initiative that looks like it will take off shortly but still does not have the highest trading volume, cryptocurrency traders may want to get into the game on the first wave, investing in the coin before it gains momentum in the market and its price skyrockets.

When choosing a trading location, please pay attention to the trading volume on various exchanges, as this affects the prices they offer. Since many exchanges have a specific geographical focus, for example, Asia or Europe, tracking the volume of trading on exchanges can be a valuable tool to determine where activity is concentrated for a given coin.

In search of platforms with the most significant trading volume, cryptocurrency traders should pay attention to reliable, regulated operations with a good reputation among the crypto community. Such exchanges have the most traffic and serve as a hub for people buying and selling coins. Both exchanges must have a high trading volume and any platform that connects to these exchanges to trade on your behalf. One example is Intelfin, an automated cryptocurrency trading platform through which many of the world's cryptocurrencies pass. Since this creates more liquidity for the podium, leading to increased profitability for the platform user.

How is the volume of cryptocurrency trading estimated?

When it comes to finding the cryptocurrency with the highest trading volume, traders should look for a coin that shows excellent activity on a large number of exchanges, not just a few. You want to see evidence of investor interest around the world. Thus, it is possible to get a more precise and more accurate assessment of the trading value of the coin. On the Internet, you will find a lot of free tools that provide a cumulative trading volume and allow you to compare the activity of various cryptocurrencies over a certain period.

In principle, if a certain price level is maintained and there is high demand in the order book, we can expect that the coin price will rise with an increase in trading volume and a surge of new orders. However, one should be careful if the cryptocurrency experiences sharp peaks in trading volume. This may indicate an inflated price when the coin is overvalued, and you want to leave before the price drops.

In search of the cryptocurrency with the highest trading volume, investors should learn to understand the order book, a list of pending orders placed on the exchange for a particular coin. A list of pending buy orders is recorded on one side, and all awaiting sell orders are recorded. This shows the current level of interest and is a good indicator of promising cryptocurrency opportunities and vice versa. When the coin's credibility falls, crypto investors withdraw from trading, reducing the volume and negatively affecting the price. In such cases, you may want to reduce your losses or, conversely, open a short position on the asset.

Cryptocurrency markets are inherently volatile, and this is due to their high trading volume. The coins most in demand, such as Bitcoin, Ethereum, and Ripple, are traded most often and usually have the highest market capitalization. Suppose a coin shows a high trading volume for an extended period. In that case, this indicates its popularity and based on this. It can be concluded that the token exchange rate has increased, even if it has experienced a price drop. If you see a sharp jump in price combined with a low trading volume, then perhaps you should beware of investing. A little book may indicate that the trend will not last long, and a correction is imminent.

As we can see, it is difficult to overestimate the value of trading volume in the cryptocurrency markets. This is an essential indicator in the investor's arsenal when assessing the viability and stability of this coin, and constant study of volume fluctuations is one of the best ways to determine the health of your cryptocurrency portfolio.

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