Bitcoin and cryptocurrency bulls have cheered bitcoin's
more-or-less positive start to 2020, despite the rise coming off the back of a
major escalation in tensions between the U.S. and Iran. The bitcoin price,
which limped through December following six months of declines, dropped below
the psychological $7,000 per bitcoin mark early in the new year only to bounce
back again a few hours later.
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However, crypto analysts have warned bitcoin trading volume
is now at its lowest since April, with volume down 90% from its June 2019
high—and when volume is low markets are more likely to make sudden, volatile
moves.
"The seven-day average real trading volume continued
downwards this week," analysts at Arcane Research wrote this week.
"The first day of the year registered as little as $192
million in volume. These levels have not been seen since April 2019. Although this
could be related to the holiday period and less activity during weekends, this
is not a positive trend for the leading cryptocurrency in the space."
The problem appears to be worsening with volume falling fast
since bitcoin and crypto analysts warned over "dismal" bitcoin
trading volumes in October last year.
Bitcoin's volume spike earlier this year came as social
media giant Facebook unveiled its planned Libra cryptocurrency, with bitcoin
trading volume still closely tied to media coverage of crypto. Bitcoin trading
volumes are now almost back to the level they were at the beginning of
2019—when the bitcoin price was under $4,000.
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