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Simple economic principles explain that no person is willing to buy something that doesn't have much value, and the crypto market works the same way. When it comes to the crypto market, volume matters when determining value.

The importance of high volume

For a crypto exchange to operate, it needs high trade volume to keep their company alive. Trade volume is the primary source for exchanges to make money. They charge traders transaction fees on trades that are executed on their platform. Exchanges usually take a percentage of the total quantity that was traded. Now if there is low volume coming to the exchange, they will fail to be a profitable venture.

As a crypto trader, exchange volume is essential. Crypto exchanges are trader's first choice when it comes to trading cryptocurrencies. There are other modified and under-the-counter methods that might give traders lower fees and better rates. Still, exchanges offer collective order book for traders, marker or taker, to meet and make reasonably quick and easy trades to their desired prices.

When there is an ample amount of traders, that are makers and takers, this will usually pull the price spreads closer. At the same time, an exchange that has low volume typically means the market doesn't move, which results in slow executions since the asking prices of sellers don't meet the bids of potential buyers.

An exchange having high trading volume can bring in substantial money flow to a crypto asset. For example, when BTC trading volume goes, it portrays that more traders are trading BTC, or more money is being poured in by traders to buy/sell BTC. We can relate this example to the Bitcoin price surge towards the end of 2017 when the mainstream started FOMOing into BTC, which increased high buy volume and BTC posted substantial price gains. On the contrary, Bitcoin's price crash in 2018 drove high volume as well, but this time it was seller volume, which caused the 'blood bath'. Trading volume can influence price movements and show that volume is more significant regarding future price moves and overall trend.

In a sense, high volume activity within an exchange allows for more effortless trade execution between different cryptocurrencies, fiat money, and other assets. A friendly exchange that offers multiple crypto pairs, like BTC, ETH, VET, etc., to trade at significant volume is the perfect execution platform for a trader to trade.

Low-volume exchanges

Exchanges that have low volume can create excellent arbitrage opportunities because of the vast spreads between the bids and offers. These arbitrage openings primarily appear on exchanges with low-volume because the crypto coin is in low demand or the exchange itself hasn't made a real appeal to the traders. Cryptocurrency arbitrage can be a very profitable strategy if you seek out the right exchanges that have low trading volume, you can buy at a discount and then transfer the asset and sell at a premium.

In conclusion, trade volume matters when it comes to picking the correct exchange. As a trader, who is looking to get quick trades as the markets move then high trade volume exchanges will benefit you but for those who are looking to arbitrage, low trade volume exchanges would the ideal choice.


Our native desktop app, HyperTrader, depicts the market volume.

Download it today and give it a try. Charting on exchanges is 100% free.‌‌