Volume is the amount of active trading that is occurring for a particular cryptocurrency over a period of time. The 24 hour or daily trading volume is the most common volume metric you will see.

Using Volume to Assess Market Liquidity

Websites such as CoinGecko provide an overview of the total trading volume for tokens over a 24 hour period, but also provide a list of trading volume across different markets (exchanges or brokers). This enables investors and traders to identify which market has the highest volume of active trading which in turn can indicate which markets have greater liquidity.

Remember, the higher the trading volume activity, the greater the liquidity, the better the opportunity to acquire or dispose of a token.

For example, if you are looking to buy BTC you may have 2 market options available to you: Exchange A, or Exchange B. Exchange A has $5.4 million USD 24-hour trading volume, whereas Exchange B has $430 million USD 24-hour trading volume.

If you don’t understand volume, you may inadvertently decide to use Exchange A to purchase BTC, but in doing so, you are exposing yourself to the market with less liquidity, which can make it more difficult to acquire or dispose of BTC. Whereas, Exchange B has far more trading volume, indicating far more trading activity and thus far better chances to acquire and dispose of BTC.

When deciding which market or pairs (e.g. BTC/USD, BTC/ETH), be sure to take a moment to observe the volume across different markets before depositing.

Using Volume to Observe Trends and Patterns

Charts often provide the best indication of trading volume across different markets, pairs and timeframes. Traders and Investors often take note of volume in charts to further inform or measure the significance of changing trends and patterns.

For example, if there is a significant change in price on relatively low volume, this may indicate a very temporary price fluctuation to some traders or investors, whereas a significant change in price on relatively high volume may suggest a more reliable change in trend.