I've struggled to understand volume with the latest BTC rally from 29K. As I've said before, my Kucoin BTC volume shows exceptionally strong volume, but the BLX (BraveNewCoin Index) shows weak volume. Obviously the Kucoin volume is exchange specific while the BLX volume is a summary of multiple large exchanges. The difference is too much to ignore and something I felt needed an explanation.
Assuming the worst case - a low volume rally, I've been trying to understand why volume is low, but price action is very bullish. BTC has been very very bullish. I've come to a conclusion that resolves a bullish rally on "low volume". I no longer believe that volume is low. I think there has been a major change that makes volume in Feb-April to volume now not a good comparison . The Chinese market is gone. The Chinese government has essentially removed all of China from the market - both miners and investors. The Korean market was also seriously shaken. By the looks of it, these markets were very large.
Some supporting ideas: 1. Kucoin volume is not Chinese volume - its a look at a market that didnt include the Chinese before or after. In theory, apples-to-apples volume comparisons can be made on Kucoin. I see the price action on Kucoin and the volume numbers are consistent with price movement. 2. The Chinese volume from miners and holders was so large that it disrupted the market with a flood of BTC in May due a threat from the Chinese govt. To us it was normal FUD coming from China, but the Chinese knew it was real and they went to market in a panic to sell. I believe this is what cut a normal blow off top short and caught everyone by surprise. 3. Price action on weekends from UTC 0 to UTC 8 used to be a very active and volatile. The last 3 months its all but dead. There's no volume and little price movement during that Asian dominated period. This has been the biggest change that I've witnessed after the crash.
The latest move by BTC above 50k is very significant imo. With derivatives heavily biased to a price close below 48K today, it shows me BTC big money has other priorities than collecting premiums on derivatives - this was a bullish divergence where I'm always happy to say I was wrong. I'm looking for BTC to hold above 50k. My portfolio is in at 80% and stacked with the large caps. If BTC closes above 50K, I'll be looking for an opportunity to go all in. We are only knocking on the .618 fib retracement, but at some point I have to take risk, and I see a lot of green lights. Helping understand the volume discrepancy resolves a nagging concern I've had the whole way up.
This is an excellent variable to point out. Chinese volume is a huge factor to consider. What about Coinbase? Is it less accurate because it saw some Chinese volume? I am a total newbie, so forgive the stupid question, but isn't Coinbase NA and most of the volume has always been NA?
BarnBuilder
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@ncncryptography,
Interesting question. The more I looked, the more I added to my understanding. I compared volumes from 27 Jan - 20 Feb to 21 July - Current. I see that as similar prices and similar rallies from a correction.
First lets look at Binance - BTC has multiple symbols being fed from different exchanges - you'll find Binance has one. Binance originated in China and my understanding is that it essentially served the Chinese market.
1. Average volume in Jan/Feb was around 94,000 BTC/day. That dropped to 50,000/day during the recent rally. So figure half of the Binance volume disappeared (50,000 * $45,000 = $2.25 Billion/day). I think that further confirms my theory that the major hit to volume came from the Chinese market.
2. Coinbase is a little trickier because there is 2 symbols now - BTC/USDC and BTC/USDT. In Jan/Feb there was only BTC USDC which totalled around 1,300 BTC/day. Currently, if you add up both the USDC and USDT volume you get somewhere between 1300 to 1500 BTC/day. So, I'd say that CB volume is at least equivalent to the same period if not a tad higher.
3. However, the bigger observation is how the Binance volume is almost a factor of 100x CB. Again, it gives a perspective on how large the Chinese market was, and certainly points are root cause for the May sell-off and why the BTC market dominance and volatility is much more subdued.
Good question. Thanks
ncncryptography
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@BarnBuilder, I appreciate the well researched and well thought out response! Thank you. With credit to you, I will bring this idea to a trader I follow on Monday morning and hear his thoughts. He's been strongly bearish since bottom in July.