Crypto market momentum slows as trading volume declines

The cryptocurrency market is experiencing a significant slowdown in momentum, as evidenced by a sharp decline in trading volumes.

According to Santiment, a market intelligence platform, the drop in crypto-wide trading volume since February 27 reflects "exhaustion, hopelessness, and capitulation" among traders.

The total cryptocurrency trading volume peaked in early February at $440 billion but has since plummeted by 63% to around $163 billion as of March 12.

This decline is mirrored in the market capitalisation, which has fallen by almost 25% since the beginning of February, losing approximately $900 billion.

Santiment notes that the consistent drop in trading volume, even during slight price recoveries, indicates "diminishing trader enthusiasm" and suggests that traders are cautious about buying at current levels.

The platform emphasises that a sustainable market recovery typically requires both rising prices and increasing trading volumes.

The decline in trading activity is attributed to various factors, including geopolitical tensions, such as President Trump's tariff threats, and economic concerns like fears of a U.S. recession.

These uncertainties have led to a decrease in investor confidence, contributing to the market's bearish trend.

While some exchanges, like Bitfinex, have seen increases in spot trading volumes, the overall trend remains bearish, with significant declines observed across major platforms like Crypto.com and Kraken.

The drop in open interest on centralised exchanges further underscores the weakening market momentum.

In summary, the crypto market's current state is characterised by reduced trading activity and market capitalisation, signaling a cautious outlook for investors.

A recovery would likely require a simultaneous increase in both prices and trading volumes to restore market confidence.