Volume of the trade or trading volume is the total number of shares, contracts, or a number of assets traded for a specified security or a stock. Simplifying the trading volume, it is a number of securities changed hands on a specific day or during a particular period of time.
The active trading increases trading volume while slow trade of shares decreases it. Most industries track their trading volume on an hourly basis each day. It is a descriptive property, which is useful to understand the liquidity status of assets and cryptocurrencies, their reliability, and the activeness of the market.
Startlingly, in a minimal span of their existence, cryptocurrencies have hit an immense volume. Consider Bitcoin (2009) and General Electric Company (1962) between April and July. The former had a daily trading volume between $3 billion to $6 billion, whereas GE had a trade volume of $1 billion, says Yahoo.
How do Exchanges Track Trading Volume of a Cryptocurrency?
Adopting the same principles as those of traditional assets and securities exchanges measure the crypto volume. Based on the activity, they measure 24 hours trading volume, also available for previous days and months forecasting the future. Many exchanges list the trading volume of crypto and general trading volume combining the aggregate volume/data from all exchanges. Whereas, some exchanges have higher trading volume making the cryptocurrency trading fast and easier. New exchanges often have low trading volume, just as we observe in the case of Bakkt, where Bitcoin trading volume affected by 70%.
Importance of Trading Volume for Traders and Coin:
Large trade volumes are of significant importance. They help to tackle with drastic price changes and high fluctuations and also increase the reliability of the cryptocurrency platform in the global market. They also tell the price movement and its behavior. If you observe an increasing trade volume of any cryptocurrency, you may say that is leading to a significant price move.
The trade volume depicts the liquidity of a cryptoasset and ensures that price not prone to drastic swings. It shows the trustworthiness and stability of a coin and resistance to market participants and orders.