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Bitcoin Price Depressed By Trading Volume Worries, SEC Probe

By ValueWalkCryptocurrencyMar 04, 2018 12:57AM ET
Bitcoin Price Depressed By Trading Volume Worries, SEC Probe
By ValueWalk   |  Mar 04, 2018 12:57AM ET
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The bitcoin price touched $11,000 early this morning but just didn’t have enough strength to keep going, and now it’s holding stubbornly below that level. Worries about the cryptocurrency’s popularity are starting to spread with the realization that the bitcoin trading volume is down dramatically from where it once was. Meanwhile, reports that the Securities and Exchange Commission is doling out subpoenas in an investigation of initial coin offerings are only worsening the market’s crypto anxieties.

Most crypto fans follow the bitcoin price, or the dollar value of each token, but another metric that’s gaining attention is the bitcoin trading volume. It doesn’t seem like much of a surprise that the bitcoin trading volume fell along with its price early this year.

However, market observers are now noticing that even though the bitcoin price has rallied 50% since early February, the number of transactions carried out in the cryptocurrency has not recovered. In fact, the average daily bitcoin trading volume is about half of where it was in December, according to data from—down to approximately 200,000 from nearly 400,000 in the middle of December.

Bloomberg also notes that the number of bitcoin transactions that are pending or waiting for the network’s official recognition is down to approximately 35 million bytes per week. At the beginning of the year, the bitcoin network had about 130 million bytes of transactions pending in a week. The amount of time it takes to process bitcoin transactions has also plunged, the media outlet adds.

Ironically, the amount of time it was taking to complete transactions on the bitcoin network has been one reason critics have argued against it ever becoming a standard for processing payments. In response to those concerns, cryptocurrency exchange Coinbase activated what’s called the SegWit protocol in order to reduce processing times. As a result, it’s unclear how much of the decline in times is due to new enhancements, and how much is due to plunging bitcoin trading volumes.

So is the much lower bitcoin trading volume bad news for bulls? It depends on who you ask. It could be a sign that the cryptocurrency’s popularity is waning and will never recover, or it could simply mean that the market has matured and stabilized, experts told Bloomberg. If the bitcoin price skyrockets high enough, trading volumes could recover, but so far, the price and the trading volume has not been moving in lockstep lately.

Concerns about trading volume are just one of the two big issues affecting the bitcoin price right now. The Wall Street Journal reported earlier this week that the SEC has begun investigating the crypto market, starting with issuing “scores of subpoenas” seeking information from advisors and tech firms that deal in the market.

Specifically, investigators are looking at how initial coin offerings are structured. Startups in the cryptocurrency industry conduct ICOs to raise money to get things going. Officials have expressed concerns with ICOs in the past, given their lack of regulation. It’s unclear just how extensive the SEC investigation of ICOs is, however, as CoinDesk reports that some sources are saying that officials have issued only about 80 subpoenas since last fall, while others claim that hundreds have been handed out.

Although the investigation of the ICO market is likely having a negative impact on the bitcoin price, it doesn’t necessarily present a direct threat to individual cryptocurrencies. Thus far, it seems officials are taking issue with the unregulated and often sketchy way ICOs are raising money more than with bitcoin or any of the other cryptocurrencies themselves.

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Bitcoin Price Depressed By Trading Volume Worries, SEC Probe
Bitcoin Price Depressed By Trading Volume Worries, SEC Probe

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