Bitcoin trading volumes go down as interest rates rise

Published On: April 18, 2022Categories: Alternative Investments1.3 min read

The last month has seen the aggregate daily volume for those venues averaging just over $1 billion, an almost 60% decline from May 2021

With bitcoin interest rates rising, trading volumes have gone down, a Bloomberg report says.

The aggregate 30-day moving average volume for bitcoin, taken into account across Coinbase, Bitfinex, Kraken and Bitstamp, the report says, was at its lowest levels since August 2021, per data from FRNT’s Strahinja Savic.

The last month has seen the aggregate daily volume for those venues averaging just over $1 billion, an almost 60% decline from May 2021.

These developments have caused market-watchers to consider the ramifications of tighter monetary policy on digital assets.

Recently the Fed and other central banks have intensified the fight against inflation, which has been hotter and more robust for longer than expected.

That has investors looking into recalculating their needs for investment — the withdrawal of liquidity, for example, has impacted crypto volumes by reducing the funds available to invest.

And higher rates have increased the opportunity cost of investing in non-yielding assets like bitcoin.

Analysts say the percentage of bitcoin that hasn’t moved for over a year is higher than it ever was, and around 76% of the coin is held in addresses considered illiquid, showing ‘little movement.’

They say bitcoin’s price movements have been determined ‘by the risk preferences of macro investors who are concerned about the global rates and economic outlook,’ the report says, with some opining that its status now has been dominated by hodlers, investors who have stuck with the coin even through volatility.

According to Pymnts, a recent report said over 99% of bitcoin volume comes from transactions valued at over $100,000.

The larger transactions undercut the popularity of the belief that crypto is an uncorrelated asset class.

About the Author: Jonathan Adams

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