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Bitcoin trading volume is at its lowest in more than four years

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Bitcoin's trading volume hit its lowest level in almost five years this month as investors continue to wait for reasons to get back into the market.

An analysis of CryptoQuant data from spot and derivatives exchanges shows that the total volume of Bitcoins held across all exchanges fell to the lowest level since 2018 earlier this month and has struggled to recover.

As of August 26th Bitcoin According to CryptoQuant, trading volume across all exchanges was 129,307 BTC. Earlier in the month, on Aug. 12, it fell to 112,317 BTC, its lowest level since Nov. 10, 2018. It is now about 94% below the March high of 3.5 million BTC.

“Trading volume decreases in bear markets when retail investors leave,” Julio Moreno, head of research at CryptoQuant, told CNBC. “This happened in 2022 on most exchanges. As we move further into a bull market, trading volume could continue to increase.”

According to Coin Metrics, bitcoin price is still up 57% this year and is trading at around $26,100.

It's been an unbearably quiet summer for Bitcoin traders, but seasonality accounts for only a limited part of it. The US authorities' crackdown on cryptocurrencies, coupled with the end of the banking crisis in May (which accounted for much of the year-to-date gains), sent market makers and traders fleeing – and they had no reason to return.

Even after Bitcoin's violent sell-off on Aug. 17 — the biggest one-day sell-off since the FTX fallout peaked in November — the market quickly calmed down. Data shows that long-term investors are not easily shaken by recent weakness.

“In total, [the] “The market remained dull awaiting a new catalyst and overall market liquidity remained tenuous,” Bernstein analyst Gautam Chhugani said in a note on crypto trading last Monday. “This market is not necessarily bearish, but participants remain disinterested in trading “while the market awaits catalysts” — particularly in the form of decisions on one of the spot bitcoin ETF filings pending with the Securities and Exchange Commission .

Chhugani said that regardless of what ends up bringing some movement back into the market, investors' real opportunity “lies in maintaining the new market cycle,” which tends to coincide with Bitcoin's halving. The next one is expected to take place in spring 2024. Cantor Fitzgerald reiterated the emphasis on the long game.

“Although short-term catalysts can take many forms, we remain committed to the long-term story of continued crypto adoption and the staying power of Bitcoin as an alternative asset and store of value,” said Josh Siegler, an analyst at Cantor Fitzgerald, in a note Monday.

—CNBC's Michael Bloom contributed coverage.

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