How to Track Crypto Trading Volumes – DL News

It’s worth getting to know trading volumes if you want to better understand the crypto market.

The trading volume of a crypto-asset – how much of it is bought and sold within a given time frame – spins a complex thread about its popularity.

These intervals can vary from minutes, hours, months or even years. Analyzing trading volumes can reveal valuable insights into the inflow and outflow of money in DeFi, as well as the liquidity of specific assets.

When trading volumes rise, you’ll know something big is happening in the market – and it’s often not good news.

For example, trading volumes for Terra’s UST stablecoin rose to all-time highs during its May 2022 crash. When USDC broke its dollar peg in March 2023 amid the cryptobank crash, Ethereum decentralized exchanges recorded their highest ever trading volumes.

On the other hand, a slow and steady increase in trading volume may suggest increased use and adoption of a DeFi protocol or blockchain.

But be careful – trading volumes often turn out to be completely deceptive. In an early filing for a Bitcoin exchange-traded fund, software services provider Bitwise complained to the Securities and Exchange Commission that 95% of Bitcoin’s trading volume on CoinMarketCap was entirely made up. Things are not necessarily much better today.

This article will explain what crypto trading volumes are, how they are calculated and how to proceed using DefiLlama.

What are crypto trading volumes?

In the cryptocurrency market, trading volume refers to the value of all the transactions of a specific asset within a specific time.

Trading volume data is a mix of self-reported volume from cryptocurrency exchanges, much of it unverifiable, and on-chain volumes from decentralized finance protocols that are verifiable and traceable.

For example, the overall daily trading volume of Ether, the native currency of the Ethereum blockchain, is about $8.6 billion, according to crypto-metrics website CoinMarketCap. This figure represents all the ETH bought or sold on cryptocurrency exchanges in the last 24 hours.

This includes self-reported data from centralized exchanges and data scraped from DeFi protocols such as Uniswap and excludes peer-to-peer transfers and over-the-counter trading.

In comparison, trade volume data on DefiLlama draws only from verifiable on-chain data, and looks at total trade volumes on specific blockchains or DeFi protocols, rather than for individual assets.

High trading volumes can indicate strong buying pressure, where investors are eager to buy an asset, or strong selling pressure, where investors are offloading their holdings.

Indeed, there is an entire art dedicated to tracking changes in prices and volumes called technical analysis, where traders attempt to predict a cryptocurrency’s future price by looking for patterns in price and volume charts.

Track trading volumes on DefiLlama

While sites like CoinMarketCap or CoinGecko focus on volumes of the entire crypto market, DefiLlama provides a comprehensive overview of DeFi trading volumes.

The overview subsection lists trading volumes for decentralized exchanges, in order of 24-hour trading volume. Users can filter the data on daily, weekly or monthly time frames, and across dozens of different blockchains.

The Chains subsection, on the other hand, provides data on the total trading volumes on different blockchains, such as Ethereum and BNB Chain. Users can find data showing the weekly change in trading volume and cumulative trading volume in addition to daily and weekly time frames.

For those interested in the non-slingable token market, DefiLlama also tracks trading volumes for popular NFT projects and marketplaces. It lists metrics, such as floor price, price change, volume and collection supply, for various NFT collections. In addition, DefiLlama ranks NFT marketplaces by volume, market share and number of trades.

The Derivatives and Options subsections provide data on the trading volumes of various derivative products, such as options and perpetual futures, across different platforms.

Users can filter the data by platform, blockchain and timeframe, allowing them to track the performance of different derivatives and trading activities over time.

Are crypto trading volumes reliable?

Even on-chain data is not necessarily an accurate depiction of a protocol or asset’s trading volume. Fraudulent exchanges or traders can artificially inflate trading volumes to inflate the numbers, making an asset or protocol appear more popular than it really is. Garbage in, garbage out, as they say in programming.

Various accounting efforts have attempted to account for false trading volumes. NFT wash trade filters, such as those offered on Nansen, CryptoSlam or on DefiLlama, try to remove inorganic activity and give a more accurate picture of trade in the chain.

To highlight the extent of wash trading, DefiLlama’s NFT trading volume dashboard includes data showing the percentage of inorganic trades relative to organic trades over the past seven days.

Happy hunting!