Dramatic increases in trading volume can alert crypto investors to price highs that are yet to come.
An uptick in trading volume is one of the key components of a digital asset’s healthy market outlook. It indicates both robust liquidity and a surge in fellow traders’ enthusiasm for the token. The relationship between the asset’s price and trading volume is a nuanced one: Volume spikes often trail strong rallies as more and more traders hop on the bandwagon in the hopes of a ride to the moon.
Yet, in some cases, it is surging trading volume that leads to price appreciation. In such a scenario, getting alerted to anomalous trading activity around a token can help crypto investors to spot the early signs of an impending rally. Regardless of whether the trading volume spikes precede or follow the price action, the assets that exhibit unusual behavior on this key metric merit a closer look.
The five assets featured below showed the greatest week-to-week increases in trading volume last week and were featured in the Unusual Trading Volume section of Cointelegraph Markets Pro dashboard. In three cases out of five, anomalous upticks in trading volume foreshadowed major price increases.
FRONT: Trading volume explosion following an exchange listing
FRONT, a token representing decentralized finance (DeFi) aggregator Frontier, topped the chart of last week’s trading volume movers chart with a 3041% increase on the heels of its listing on the Korean crypto exchange Bithumb. As evident in the graph, the Jan. 26 listing announcement had first triggered a price spike as the coin’s value almost doubled, soaring from $0.41 to $0.78 in less than six hours. FRONT’s trading volume followed the price dynamics closely, peaking the day after the announcement.
QKC: A minor price pump anticipates a price peak
QuarkChain (QKC) saw two dramatic trading volume increases last week, the greater (+2862%) coming last and following the coin’s weekly price high. In a curious plot twist, there was also another, rather short-lived trading volume spike that came on Jan. 25 and preceded the price rally by roughly 18 hours.
WAVES: Price wave first, trading volume wave second
At the height of a trading volume momentum that came on Jan. 27, WAVES registered an 860% increase compared to the week before. The volume pump followed a sharp price increase as the token shot up from $8.39 to $11.38 in about five hours. Trader activity remained high even as the price began to correct.
LOOM: Short trading volume pump anticipates price peak
Loom Network’s (LOOM) trading volume vs. price chart looks similar to that of QKC above: A sudden and short spike in the trading volume coming several hours before the week’s peak price. What caused LOOM’s Jan. 25 trading volume explosion from around $5 million to upwards of $34 million (a 520% increase compared to the previous week) is anyone’s guess. What is certain is that over the next day LOOM’s price added 14%, reaching the weekly high at $0.062.
OXY: Price and trading volume rise together
In the case of Oxygen (OXY), starting from the Jan. 24 afternoon, both the price and the trading volume lines embarked on upside trajectories, moving up beside each other. A peak trading volume of around $3.8 million, registered on Jan. 26, marked a 421% week-to-week increase. A weekly price peak near $0.49 followed in 12 hours.
Comprehensive crypto data intelligence
In addition to the raw outlier data present in a dedicated section of the CT Markets Pro website, trading volume is also one of the key ingredients of the VORTECS™ Score, an algorithmic indicator comparing historic and current market conditions around digital assets to identify historically bullish, bearish or neutral outlook.
Any single metric that shapes an asset’s market outlook can be uninformative on its own, yet it becomes much more useful when contextualized within a host of other variables that the VORTECS™ algorithm considers, such as price movement, social sentiment and tweet volume.
Cointelegraph is a publisher of financial information, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risk including the risk of permanent and total loss. Past performance is not indicative of future results. Figures and charts are correct at the time of writing or as otherwise specified. Live-tested strategies are not recommendations. Consult your financial advisor before making financial decisions.