Bitcoin volume falls to 3-year low as summer activity sags

• Crypto volumes are sagging amid summer lull
• In dollar terms, the amount of Bitcoin moving on-chain is at three-year lows
• Trading activity commonly dies down in trad-fi markets at this time of year
• However, falling crypto volumes have been realised consistently over the last year, while the dropoff has been starker than other asset classes

On-chain activity is rather muted right now. The seven-day moving average of transfer volume on the Bitcoin network is currently at its lowest level since August 2020. 

On the one hand, the falling volume represents a traditional summer lag in trading activity. However, the lowly activity is not far out of place with what we have seen thus far this year, with liquidity and volume markedly lower since the FTX collapse in November. 

Looking at dollar volume, as per the above chart, also takes into account the rampant volatility in the BTC/USD price over the years. If we assess activity in BTC terms, the dropoff is even more stark. Measuring in Bitcoin, the seven-day moving average is it at its lowest point since 2014, when Bitcoin was a niche Internet asset trading for a few hundred dollars.

The dropoff is not limited to Bitcoin. Crypto exchanges have seen volume decimated in the last couple of years. According to data from the Block, there was $984 billion of trading volume in March 2022. Last month, that figure read $413 billion, a fall of 58%. The chart shows the aggressive spike up in 2021, followed by a long and steady downtrend to today.

This follows in line with the shift in monetary policy. The $984 billion of trading volume in March 2022 came in the same month that the Federal Reserve first hiked rates. Since then, the increases have come thick and fast, with investors dumping risk assets relentlessly.

While there has been a bounceback this year as inflation has cooled and optimism over the end of the tightening cycle approaching picks up, prices remain far below the peaks of 2021. So too do volumes, liquidity and overall activity in the space. 

“The pace of interest rate rises from the Federal Reserve has been relentless”, says Max Coupland, director of CoinJournal. “This impacted risk assets across the financial landscape last year, and of course crypto prices are an obvious reminder of this. But while prices have begun to bounce back in 2023, volumes and liquidity in the…