Together with price action, trading volume is a useful indication that can help determine if a company is overbought or oversold. Simply put, a large trading volume shows that the market is confident in the direction that a stock will move.
On the other hand, a low and declining trading volume indicates that the market has run out of participants to continue driving the stock in the current direction, and a trend reversal may be imminent.
A report published by Viridi Research, an investment advisor for cryptocurrency-related goods, showed that the current economic downturn is not just affecting Bitcoin (BTC) values but also other coins and markets. As the crypto winter worsens, Bitcoin mining stock volumes are also in the dumps. They assert, however, that the stocks are oversold.
Jared Mellurud, associated with Viridi Funds said that the same has been observed with BTC mining stocks over the past few months as the price of the world’s largest cryptocurrency by volume is trading near its two-year lows.
One can determine the relative investor interest in BTC mining stocks by comparing their combined trading volume to BTC’s volume because BTC mining investors have the option of investing directly in BTC or purchasing BTC mining stocks.
Since November 2021, the prices of BTC mining stocks have been falling. In addition, their combined trading volume has sharply decreased, especially in comparison to BTC’s trading volume.
Despite the downward trend in the price of BTC over the past year, the daily trading volume has remained fairly consistent at $4 billion and has even increased recently, with some days seeing transactions as high as $15 billion.
BTC-denominated volumes have significantly surged as a result of the price decrease, indicating that investors are frantically trying to sell the asset due to a more constrained macroeconomic environment and contagion effects unique to the cryptocurrency market.
Marathon has been in charge of 46% of the total trading volume since November 2021. Riot is second with 27% of the volume, and Hut 8 is third with 7%. Over the previous year, trading volumes for these three corporations collectively accounted for 80% of the sector.
The report added that the mining stocks’ poor performance has resulted in low valuations, which could be helpful for investors who wanted to enter this sector at lower prices.
Unfortunately, there are a number of problems that BTC miners are now dealing with. The hash rate of BTC, a metric of the computing power of a network, is almost at its maximum. Blockchain.com reports that the hash rate is at 262 EH/s (exa hashes per second). Additionally, this has decreased slightly from its peak of 273 EH/s on November 2.
It doesn’t seem like the situation with the BTC mining sector will get any better any time soon. Profitability for miners depends largely on price recovery, which is unlikely to occur in the near future.
Since yesterday, BTC prices have risen by 0.28%. As a result, at the time of writing, the asset was trading for $16,726. Miners may have to wait longer for a rebound as the largest cryptocurrency is already down 75.6% from its peak.