Crypto Market Participation Plunges as Trading Volume Drops


It’s all calm in the crypto world. Trading volumes, liquidity and volatility are all exceptionally low across the board. Even Bitcoin’s impressive 76% rise this year has been methodical and steady, unlike the huge spikes in activity seen in previous bull markets.

One way of illustrating the muted market activity is through the rise of Bitcoin dominance. This measure of Bitcoin’s market cap relative to the entire cryptocurrency market cap has risen above 50%, up from around 40% at the start of the year. Typically, Bitcoin has performed worse than altcoins in bull markets, with dominance therefore dropping.

Regulation has had a significant impact in suppressing market participation. The SEC has outlined several coins as securities, including Solana (SOL), Polygon (MATIC) and Cardano (ADA). Ripple secured an optimistic ruling in its own case against the SEC, but legal uncertainty remains. Exchanges have also seen severe crackdowns, with both Coinbase and Binance being sued in June, and Binance also subject to a Department of Justice investigation.

The low market participation has had a notable effect on volatility too. It has recently dropped to three-year lows, and Ethereum volatility has even dipped to the same level as Bitcoin’s, or even below it.

It’s clear that a combination of factors, including investors retreating from risk, the bear market and regulatory uncertainty, is suppressing liquidity, trading volume and volatility. Volatility will return eventually, but for now, crypto charts are relatively quiet.

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