Crypto trading volume plunges 63% despite market cap recovery – Rally at risk?

• The declining crypto trading volume raised concerns about weakening market momentum and trader exhaustion.
• Sustained recovery requires both rising prices and increasing trading volume for stronger market trends.

The crypto market is showing signs of recovery, with the global market cap reaching $2.71T, reflecting a 1.13% uptick, according to CoinMarketCap.

However, beneath the surface, analysts warn of potential weaknesses, as declining trading volumes and sluggish price action indicate trader exhaustion.

Crypto trading volume declines

Crypto-wide trading volume, which peaked at $440 billion in February amid dip-buying, has since plummeted 63% to $163 billion as of the 12th of March, per CoinGecko data.

This sharp drop raises concerns about fading momentum, suggesting that the recent uptrend may not be as strong as it appears.

Additionally, market data from CoinMarketCap reflects a similar trend, showing that trading volume peaked in early March 2025 before retreating by 52%.

Echoing these observations, analytics firm Santiment highlighted a noticeable shift in trader sentiment, noting on X that crypto-wide trading volume has steadily declined since its 27th February peak.

The firm added, 

“When trading volume for major cryptocurrencies consistently drops, even during slight price recoveries (like we have seen Wednesday), it typically points toward diminishing trader enthusiasm.” 

Initially driven by optimism amid price dips, recent market cap declines have led to a wave of exhaustion, hopelessness, and capitulation among traders.

Is this a bearish sign?

As expected, amid shifting market conditions, traders are displaying increased caution, signaling skepticism about the sustainability of recent price gains.

The decline in trading activity suggests growing uncertainty, with fewer investors confident that current price levels offer strong profit potential.

Additionally, the combination of weakening trading volume and modest price recoveries could indicate fading market momentum.

Thus, without substantial buying pressure to reinforce upward trends, any short-term gains risk losing traction, potentially leading to renewed volatility in the crypto market.

“This leads to the possibility that any rebound could be temporary, with prices vulnerable to another downturn.”

However, despite declining volume during price rebounds, this isn’t an outright bearish signal.

What’s more?

For those unaware, trading volume reflects participation from both retail and institutional investors, and for a sustained price recovery, an uptick in volume is crucial.

Hence, a resurgence in buying activity could serve as a precursor to stronger market trends.

 “To signal a healthier and more sustainable recovery, bulls generally will want to see both rising prices and rising volumes simultaneously.”

Meanwhile, persistent fear in the market, as reflected by the Crypto Fear & Greed Index staying below 50 at 45, signals lingering uncertainty.

Therefore, with geopolitical factors like Trump’s tariffs impacting sentiment, traders remain cautious, awaiting clearer market direction.