Spot Bitcoin Trading Volumes Remain Weak – A Threat to BTC Bull Market Thesis?

After hitting their highest levels last month since the aftermath of the collapse of the FTX cryptocurrency exchange last November thanks to significant volatility and zero trading fees on BTC pairs on Binance, spot Bitcoin trading volumes have fallen significantly.

According to data pulled from CoinGecko’s API, spot Bitcoin trading volumes across major exchanges were around $16.4 billion on Friday.

That compares with close to $70 billion this time last month.

And it is not only the spot volumes that have weakened recently.

According to data presented by crypto analysis website The Block, mid-April, trading volume for Bitcoin futures has only reached about $350 billion month to date.

For the entire month of March, the trading volume for Bitcoin futures was around $1.3 trillion.

Options trading volumes are also tracking for a weaker month, according to another chart presented by The Block.

Weaker volume a threat to the Bull Market thesis?

Some might interpret weaker trading volume as an indication of dampening demand for Bitcoin.

While it is true that previous large trading volume spikes have coincided with price increases, such as for Bitcoin in the first half of 2021, the relationship between higher volume and higher prices is tenuous.

It is confirmed by the fact that Bitcoin has been able to continue its upward trend in recent weeks, despite the fact that trading volumes have faded.

In fact, the BTC price rose above $31,000 for the first time since last June on Friday, taking its gain for the month to around 7.0% – a month that has seen volumes drop significantly compared to March.

For now, while an increase in trading volume would be welcome (if fueled by an influx of new demand for Bitcoin), the BTC price may well continue to push higher.

That’s because Bitcoin has a lot of very important tailwinds right now.

Bitcoin is poised to continue to benefit from technical, macro and on-chain tailwinds

Chart analysis suggests that continued Bitcoin price upside remains a distinct probability.

Since breaking north of last month’s highs in the mid-$29,000s, the door has now been opened for BTC to hit the next major resistance area around $32,300 (the late May/June 2022 highs).

All of BTC’s major moving averages are moving higher in sequence, and the 21-day moving average recently provided strong support, a vote of confidence in Bitcoin’s short-term momentum.

Other long-term technical signals from the major moving averages are also positive.

Bitcoin’s strong rally in mid-March from a retest of the 200DMA (and realized price) just below $20,000 was interpreted by many as confirmation of the bull market at the time, and continues to offer tailwinds.

Also, the golden cross that BTC price enjoyed in early February – historically a very bullish signal for BTC – is another long-term technical tailwind for price action.

Bitcoin’s 14-day relative strength index (RSI) is flirting with being in overbought territory, suggesting that the risk of short-term profit-taking is increasing.

But this doesn’t always stop BTC from going on a decent streak of short-term gains, with the recent price rally from mid-January to February being a prime example of this.

Positive on-chain trends are also an indication that Bitcoin’s mid- to long-term trading bias will remain on the upside.

First, core metrics related to network utilization (which thus acts as a proxy for “demand” for the Bitcoin network).

Metrics such as daily active address numbers, the number of addresses with a non-zero balance, the number of new addresses and the number of daily transactions continue to trend higher, according to data presented by crypto analytics firm Glassnode.

Meanwhile, other on-chain metrics, such as those monitored in Glassnode’s “Recovering from a Bitcoin Bear” dashboard, are all screaming bull markets.

This dashboard tracks eight indicators to determine if Bitcoin is trading above key price patterns, if network exploitation momentum is increasing or not, if market profitability is returning, and if the balance of USD-denominated Bitcoin wealth favors long-term HODLers.

All eight indicators have now more or less flashed green in unison since mid-March, the longest such period in just over two years.

Historically, the moment when all the indicators on the dashboard turn green (ie right now) has been a great long-term buying opportunity.

If the US economy is headed for recession and deflation and a rate cut cycle from the Fed is coming, the macro conditions are certainly there for a continued Bitcoin bull market.

That’s not to mention a widely expected continuation of Bitcoin’s (and more generally crypto’s) global adoption, which is really the main long-term bullish argument.