"Crypto spot trading volume halves in three months…a sign of cooling investment demand"

As spot trading volumes in cryptoassets plunge back to last year’s levels, an analysis suggests weakening investment demand is becoming increasingly evident across the market.

According to Cointelegraph, a cryptoasset (cryptocurrency) news outlet, spot trading volume on major exchanges fell from around $2 trillion in October last year to roughly $1 trillion as of late January this year. In just three months, the scale of trading has effectively been cut in half.

Bitcoin (BTC) is down about 37% from its October peak, and market observers say trading activity has slowed sharply as shrinking liquidity coincides with a risk-off mood. On-chain analytics firm CryptoQuant said, “Spot demand is cooling rapidly,” adding, “This correction is an extension of the trend that followed the large-scale liquidations on Oct. 10 last year.”

The contraction is also evident in exchange-level metrics. Binance’s bitcoin spot trading volume declined from about $200 billion in October last year to roughly $104 billion recently. CryptoQuant noted, “Current volume is among the lowest levels observed since 2024,” calling it “a clear signal that investors are exiting the market.”

Market liquidity is also seen as coming under pressure at the same time. Stablecoins are flowing out of exchanges, and total stablecoin market capitalization has fallen by about $10 billion. This is interpreted as an indicator that overall near-term buying power has weakened.

Still, some view the pullback as an unavoidable part of the market’s structural adjustment. Justin D’Anethan, head of research at Aether Digital, said, “Over the next few months, bitcoin’s short-term risks are likely to be driven by the macro environment,” adding, “If the Fed maintains a tight stance, a stronger dollar and rising real rates could weigh on risk assets broadly.”

He added, however, “I don’t believe the inflation-hedge narrative for bitcoin is over,” and said “a meaningful rebound is possible” if spot ETF inflows resume, pro-crypto legislation advances, or a monetary-policy pivot emerges amid an economic slowdown. He also argued that “the recent correction could be a necessary and healthy move” in that it clears excessive leverage and resets investor expectations.

Meanwhile, caution still dominates regarding where the bottom may lie. Joao Wedson, chief executive of Alphractal, said, “While the average cost basis for short-term holders has already moved into loss territory, the phase in which long-term holders begin to shoulder losses in earnest has not yet arrived,” explaining that “bear markets tend to end when the short-term holders’ realized price falls below the long-term holders’ realized price.” He also noted that if bitcoin drops below the $74,000 level, the bearish phase could begin in earnest.