By Tom Blitzer
Key Insights
- Major crypto exchanges like Binance and Coinbase saw trading volumes drop by over 30% in April, marking a seven-month low.
- Bitcoin’s price fell from $73,700 in March to $59,000 in April, influenced by inflation concerns and geopolitical tensions.
- Despite a decline, trading activity on centralized exchanges remains high compared to previous months, reflecting persistent market interest.
According to a recent Bloomberg report, trading volume on major cryptocurrency exchanges experienced a notable decline in April, marking the first drop in seven months. This decrease in trading activity coincided with a retreat in the price of Bitcoin, which had previously reached a record high of $73,700 on March 14th before falling to a monthly low of $59,000 in late April.
Decrease in Trading Volume on Major Exchanges
Data from CCData, a well-respected research firm, reveals that spot trading volume on centralized exchanges (CEXs) such as Coinbase Global, Binance, and Kraken decreased by 32.6% to $2 trillion last month.
Additionally, derivatives trading volume saw a decline of 26.1% to $4.57 trillion, marking the first decrease in seven months. This downturn followed a period of growth earlier in the year, which was driven by the introduction of 11 US spot Bitcoin exchange-traded funds (ETFs) by the world’s largest asset managers.
The slowdown in trading volume can be attributed to tightening financial conditions in the United States, where the Federal Reserve is addressing persistent inflation. The anticipation of the Bitcoin Halving event on April 19, which reduced the supply of newly minted coins, had previously fueled market excitement. However, Bitcoin had never reached its previous peak in past bull cycles before the anticipated Halving event.
Impact on CME Group and Binance
Despite expectations of further price gains for major cryptocurrencies, Jacob Joseph, a research analyst at CCData, noted that the slowdown in trading activity on centralized exchanges following the Bitcoin Halving event is consistent with patterns observed in previous cycles. The CME Group, a prominent derivatives exchange, also experienced its first decline in crypto trading volume in seven months, with derivatives trading volume falling nearly 20% to $124 billion in April.
Binance, the world’s largest cryptocurrency exchange, saw its spot market share drop for the first time since September 2023. Its market share declined by nearly 4% to 33.8%, reaching its lowest level since January. This decline in trading volume and market share underscores the impact of various factors on the cryptocurrency market, including inflation concerns and geopolitical tensions.
Macroeconomic Concerns Affect Market Sentiment
Higher-than-expected Consumer Price Index (CPI) inflation data and escalating geopolitical tensions in the Middle East have introduced uncertainty and fear into the market. These factors, combined with negative net flows from US spot Bitcoin ETFs, have contributed to a decline in the prices of major cryptocurrencies.
Despite this, Joseph emphasized that trading activity on centralized exchanges remains relatively high compared to volumes recorded in previous months. Although it has slowed compared to the peak in March, trading activity is still elevated.
The crypto trading volumes on major exchanges tumbled massively in April, and the situation continued into May. Spot and derivatives trading volumes waned, causing Bitcoin and altcoin prices to dip further. Bitcoin’s price dropped to $60,400 as Federal Reserve officials’ comments and new data on inflation forecasts were against rate cuts.
Future Prospects for the Cryptocurrency Market
Trading volumes surged earlier this year in response to the approval and listing of US spot Bitcoin ETFs in January. However, the April 19 Bitcoin Halving event did not bring a sudden increase in BTC price or market recovery, with the price falling below $60,000. Consistent with patterns observed in the last two cycles, trading activity on centralized exchanges typically slows in the two months following the Bitcoin Halving event.
Concerns about sticky inflation and stagflation faced by the U.S. Federal Reserve weakened market sentiment. Additionally, hotter CPI inflation data, escalation in the Middle East tensions, and potential bank run concerns have added to the market’s uncertainty. The sentiment reversal caused negative net flows from the spot Bitcoin ETFs, further affecting trading volumes.
Despite the decline, while trading activity on centralized exchanges has slowed down compared to its peak in March, it remains at a heightened level compared to volumes recorded in other months. The recent crypto market recovery saw Bitcoin price rebound from $60,630 to $62,585 in a few hours after a 3-day descending trendline was broken. Other altcoins such as ETH, SOL, XRP, DOGE, and SHIB also rebounded.
Awaiting Another Breakout
The concerns of a pullback remain due to options expiry and upcoming economic data. A breakout above the descending channel since mid-March could be bullish for Bitcoin’s price, potentially hitting $100,000. This would confirm the post-halving Bitcoin price rally, triggering a broader crypto market rally.