Spot crypto trading volumes on major exchanges have plunged from around $2 trillion in October to $1 trillion at the end of January, signaling “clear disengagement from investors” and weakening demand, analysts say.
Bitcoin has fallen 37.5% from its October peak, amid a liquidity squeeze and heightened risk aversion, contributing to the sharp contraction in trading activity.
“Spot demand is drying up,” said CryptoQuant analyst Darkfrost on Monday, noting that the correction “has been largely driven by the October 10 liquidation event.”
Since October, crypto spot volumes on leading exchanges have halved. Binance, for example, saw Bitcoin trading volumes drop from $200 billion in October to roughly $104 billion today, according to CryptoQuant.
“This contraction in volumes has brought the market back to levels among the lowest observed since 2024, suggesting a clear disengagement from investors in the crypto market and, consequently, weaker demand.”
Analysts caution that declining spot volumes are not the only factor weighing on the market. Liquidity pressures are also building, evidenced by stablecoin outflows from exchanges and roughly $10 billion in stablecoin market cap losses, they noted.
Bitter medicine, but necessary
Justin d’Anethan, head of research at Arctic Digital, told Cointelegraph that Bitcoin’s biggest short-term risks remain largely macro-driven.
“Uncertainty around Kevin Warsh’s hawkish stance as Fed chair could mean slower or fewer rate cuts, a stronger dollar, and higher real yields—all of which put pressure on risk assets, including crypto,” he said.
Taking a contrarian view, d’Anethan added, “I don’t think the narrative of Bitcoin as a debasement or inflation hedge is over. BTC was built to protect against reckless monetary policy and long-term currency debasement.”
He noted that potential catalysts for a meaningful rally could include “the resumption of strong ETF inflows, clearer pro-crypto legislation, or softer economic data that pushes the Fed toward easier policy.”
“It might be a bitter medicine, but the recent move feels ultimately necessary and healthy to clear out leverage, tone down speculation, and force investors to reconsider valuations.”
Bitcoin not near bottom yet
Joao Wedson, founder and CEO of Alphractal, said two conditions must be met for Bitcoin to reach a price bottom.
First, short-term holders (STH) need to be underwater, which is currently the case. Second, long-term holders (LTH) must begin carrying losses—a scenario that has not yet occurred.
Wedson explained that bear markets typically end when the STH realized price drops below the LTH realized price, and bull markets begin when it rises back above.
At present, the STH realized price remains above the LTH level, though a decline below key support at $74,000 could push Bitcoin further into bear market territory.
