Spot crypto trading volumes on major exchanges have fallen from around $2 trillion in October to $1 trillion at the end of January, indicating “clear disengagement from investors” and weaker demand, according to analysts.
Bitcoin (BTC) is currently down 37.5% from its October peak amid a liquidity drought and a major bout of risk aversion, causing volumes to contract.
“Spot demand is drying up,” said CryptoQuant analyst Darkfost on Monday, adding that the correction “has been largely driven by the Oct. 10 liquidation event.”
Since October, crypto spot volumes on major exchanges have halved, according to CryptoQuant. Binance, for example, saw $200 billion in Bitcoin volume in October, and that has now fallen to around $104 billion.
“This contraction in volumes has brought the market back to levels among the lowest observed since 2024, suggesting a clear disengagement from investors in the crypto market and, consequently, weaker demand.”
However, this is not the only factor at play, they said.
Market liquidity is also under pressure, as reflected by stablecoin outflows from exchanges and around $10 billion in stablecoin market cap declines, they added.
Bitter medicine, but a necessary market move
Justin d’Anethan, head of research at Arctic Digital, told Cointelegraph that the biggest short-term risks for BTC over the next few months look 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, which all pressure risk assets, including crypto,” he said.
Related: Crypto selloff is likely due to US liquidity drought: Analyst
“I don’t think the narrative of BTC as a debasement/inflation hedge is over — Bitcoin was built to hedge against reckless monetary policies and very long-term currency debasement,” he said as a contrarian take.
“The resumption of strong ETF inflows, clearer pro-crypto legislation, or softer economic data that forces the Fed back toward easier policy” could spark a meaningful rally, d’Anethan said.
“It might be a bitter medicine, but the recent move feels ultimately necessary and healthy to clear out leverage, tone down speculation, and force investors to reconsider valuations.”
Not close to the Bitcoin price bottom yet
Alphractal founder and CEO Joao Wedson pointed out that two things need to happen for a Bitcoin price bottom.
Short-term holders (STH) need to be underwater, which is the current scenario, and long-term holders (LTH) “start carrying losses,” which has not happened yet.
He added that bear markets only end when the STH realized price falls below the LTH realized price, and bull markets begin when it crosses back above.
Currently, STH realized price is still above LTH, though a fall below key support at $74,000 could see BTC enter bear market territory.
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