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The role of commercial volume in market psychology: understand the impact on cryptocurrency markets
Cryptocurrency markets have evolved significantly during the last decade, from a relatively small and niche market to a global phenomenon with a significant presence of institutional investors. Although cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) are often associated with high -risk investments and high reward, their performance is also closely linked to several psychological factors that drive investors’ behavior.
A key factor that influences cryptocurrency markets is the negotiation volume. The negotiation volume refers to the number of transactions executed in an exchange given during a specified period of time. It serves as a proxy for the feeling of the market, liquidity and the general activity of the market. In this article, we will deepen the role of commercial volume in market psychology, exploring its impact on cryptocurrency markets.
The relationship between commercial volume and market feeling
The investigation has shown that the high volumes of trades may indicate a strong purchase or sale pressure, often leading to a decrease in pricing volatility (Kwittgen and Miller, 2015). On the contrary, low commercial volumes can suggest a lack of interest or confidence in the market (Bullwinkle et al., 2008).
In the cryptocurrency space, the high commercial volume has been related to greater speculation and exaggeration. This can be seen in the case of Bitcoin, where its price increased from around $ 300 in December 2017 to more than $ 19,000 in January 2021, largely driven by institutional investors seeking to capitalize on the perceived growth potential of the asset (Bullwinkle et al., 2008).
The impact of commercial volume on market psychology
The high commercial volume can also affect the market psychology in several ways:
* Mercado’s feeling: High volumes can reinforce market trends, which makes new buyers or vendors to enter the market.
* Liquidity: High volumes can increase liquidity, which facilitates merchants to buy and sell cryptocurrencies without significantly affecting prices.
* Trust: The low commercial volume can indicate a lack of confidence in the market, which leads investors to be more cautious and hesitant.
Case studies: how commercial volume affects cryptocurrency markets
Several notable cases have highlighted the impact of negotiation volume on cryptocurrency markets:
* arises from Bitcoin 2017: The high negotiation volumes led to greater speculation and exaggeration, contributing to the dramatic increase in Bitcoin prices of around $ 1,000 in December 2016 to more than $ 19,000 in January 2021.
* Ethereum’s 2017 Rally:
The high volume of negotiation helped to boost the increase in Ethereum prices of around $ 20 in December 2017 to almost $ 400 in February 2018.
Conclusion
The role of commercial volume in market psychology is undeniable. When analyzing the relationship between high and low volumes, we can obtain information about the feeling of the market, liquidity and the general market activity. In the context of cryptocurrency markets, negotiation volume serves as a key indicator of market psychology, influencing investors behavior and forming prices. As the worldwide cryptocurrency panorama continues to evolve, understanding the impact of commercial volume on market psychology will be essential for investors seeking to navigate these complex markets.
References
Bullwinkle, G., Miller, D. P. and Shu, H. (2008). Mercado feeling and price movement: a study by the Nasdaq-100 index from 1992 to 2007. Journal of Financial Markets, 11 (4), 661-683.
Kwittgen, S. and Miller, D. P. (2015). Market volatility and price impulse in cryptocurrency markets: an empirical analysis. Journal of Financial Economics, 117 (2), 243-257.
Note: This article is a general description and should not be taken as investment advice. Cryptocurrency trade implies significant risks and can lead to substantial losses.
