The crypto market is “returning to rational” levels as the correlation between bitcoin (BTC) price and spot trading volume has dropped following the crypto market plunge on March 12, according to TokenInsight, a token data and rating agency.
Total trading volume across almost 300 spot exchanges surpassed USD 6.6 trillion in the first quarter of this year, which represents more than a doubling from the previous quarter, the agency said in its recent report. At the same time, however, the prices of nearly all cryptoassets have also corrected lower. As a result, the correlation that used to exist between price and volume is now largely gone, and is described by TokenInsight as “extremely low” at just 0.04, compared to 0.78 in 2019. Also, it stood at 0.6 before the crash and at -0.21 afterward, they added.
Given the reduction in trading volumes and the lower correlation between volume and price, the report opined that the market is now returning to a more “rational” state, with strong de-leveraging making the overall market “healthy” again:
“The overall structure of the digital asset market’s high leverage has been readjusted under the extreme market shocks, and investors have reduced the chase after the rise,” the report said, before adding that the re-adjustment that followed from market crash on March 12 “is conducive to the long-term development of the digital asset market.”
Further, the report also noted that investors have favored bitcoin over other “non-mainstream cryptocurrencies” following the crash. Similarly, the TokenInsight team also forecasts that investors will continue to place their bets on bitcoin at the expense of other cryptoassets due to the severe economic shock caused by the COVID-19 pandemic and subsequent oil price war.
“Due to insufficient incremental funds in the spot market, the returning fund into bitcoin and the impact of the global new epidemic and oil price war on the global economy, bitcoin will maintain its dominant position in the first half of this year,” the report concluded.
Meanwhile, BTC dominance, or the percentage of the total market capitalization, dropped by around 2 percentage points, to 62.6%, since March 12.
At pixel time (08:54 UTC), BTC trades at c. USD 7,138 and is up by almost 2% in a day and 1.3% in a week.