Each investment and efficient navigation in the financial market requires the know-how of not only different assets but also understanding the relationship between the different dimensions. One dimension people use for analogies is the relationship between volume and price.

Volume analysis showed the source of change in the price of the commodity and negates or confirms a given trend direction or quality. The volume reveals how investors with huge portfolios buy and sell their shares. Investors use the volume-price dynamics to trade equities, currencies and commodities on the markets created by speculators who play derivatives.

Observation of the relationship between volume and prices have become the focus of many scientists during the last few decades. Traders and technical analysts expect price changes that correlate positively with volume. Therefore, the volume should increase during an upward trend and decrease during a downward flow.

In contrast, when the trend is going downward, the volume is expected to increase as prices decline and decrease as prices gain strength. However, the volume-price dependency may change depending on the markets and assets considered.

Trend-Volume Relationships

The first price-volume comparison was done in 1966 by Ying who found that there’s a crooked relationship between the real value of the daily price change and daily volume which states that strong volume increases are associated with a strong price increase or decrease. Other inventors and authors have also come up with similar conclusions.

Positive relationships between both dimensions were confirmed based on the investigated relationship between price and volume. The positive relationship between both dimensions is in line with the expectations of technical traders. However, there has also been some negative relationship between volume and price but no matter the amount of research on the negative relationship between price and volume, no unique explanation has been given.

Researchers who want to prove the relationship between two variables use different quantitative methods to interpret and capture the price-volume relation. Volume is considered the biggest metric for crypto because of the different ways it can be split. From volume, you can predict the movement and direction of the coin.

Volume can be examined in much detail on Bitcoin Rejoin app track its movement within the last day, week or month. This reveals if the recent swings are an aberration or it is normal. The coin with a high price won’t have frequent movement so the volume will not attract attention. If the coin has less price, you will notice a heavy flow of volume to show that everyone has started jumping on the market.

Cryptocurrency is quite different from established securities so comparing the price and volume metrics may not provide us with all information. However, let’s compare trading volumes to have a sense of the relationship between volume and price. In the last month, over $3 billion worth of bitcoin has traded on the market with $1.3 billion of Ethereum also traded on the market.

This was possible due to the shift in price which made it affordable to sell this amount of crypto. However, with the price rise, you would notice the change in the volume trading on the market.

Conclusion

Volume hints at the sustainability of a given coin. A sudden increase will reduce the volume traded on the market. A drop in price for anyone with a considerable volume of the coin might mean the coin is in for an extended run. There are no certainties in the crypto market. However, you can say that the relationship between volume and price is proportional.