Bitcoin Tests $7K as Spot Trading Volumes Subside to Normal Levels

After weeks of elevated activity, trading volumes on spot bitcoin exchanges have subsided, boding well for some traders if not the venues themselves.

Prices for bitcoin (BTC) climbed less than a percent Tuesday, retracing gains lost the day before when it hit a one-week low, according to CoinDesk’s Bitcoin Price Index (BPI). The price of the bellwether cryptocurrency is above the 10-day moving average on hourly charts, a bullish signal as bitcoin tries to climb back to $7,000 levels.

Bitcoin has been gaining price momentum since 12:00 UTC (8 a.m. EDT), jumping from the $6,800 area, closely touching the $7,000 level, but currently changing hands around $6,900.

Bitcoin trading on Coinbase since April 11. Source: TradingView

This rise comes a day after large, futures liquidation-based sell-offs of $29 million caused prices to slump in early hours trading around 00:00 UTC Monday.

“Yesterday’s drop seemed pretty manipulated but, as we’ve said before, these moves are more likely now as the liquidity has dried up significantly,” said Jack Tan, founding partner at Taiwan crypto trading firm Kronos Research.

Read more: Options Market Signals Doubt Bitcoin Price Will Rise After Halving

Indeed, bitcoin volumes on USD/BTC exchanges such as Coinbase and Bitstamp have subsided to February levels after enjoying elevated volume in March when a massive sell-off occurred because of coronavirus-related fears. At one point, the price for 1 BTC dipped below $4,000 briefly during heavy trading action on March 12.

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Spot volume on Coinbase since 1/1/20. Source: CoinDesk Research’s Matt Yamamoto

Depending on trading strategies, this lower-volume environment can prove beneficial for some market participants. Lower volume means thinner liquidity and can cause prices to swing more often.

“Our options strategies have been outperforming significantly given the crazy vol[atility] environment,” said Darius Sit, managing partner at QCP Capital. The options market is sending…

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