Does Trading Volume really matter ?
Does Trading Volume really matter ?
I’ve only started noticing the Trading Volume stats on my favourite projects. I am a little intrigued as to what this exactly means, does it really matter much ? Some lesser known projects like Yield Yak have barely $4,000 in Trading Volume, yet the TVL is something like $50 million, whereas a better known project like Raydium has a Trading volume of more than $6 Million, with a TVL of only a little more than triple the TVL of Yield Yak ( $160 Million TVL )
I’m also surprised that some lesser known gaming projects like Vulcan Forged have a high trading volume , whereas others ( like Axie Infinity ) have a relatively low trading volume.
The way I interpret it right now ( correct me if I’m wrong ) is that trading volume is high when an ecosystem is very active and adoption is growing relative to other projects, so it’s a good indicator to buy into that project.
Volume is important, but it should be genuine. Don’t be overly excited if you notice a sudden spike in volume. This can be easily manipulated on both centralized and decentralized exchanges. It’s essential to examine the chart to determine whether the volume is authentic or fabricated.
Real volume is typically indicated by a price increase alongside rising volume, although large holders might still exit at any time. Conversely, if you see a surge in volume without a corresponding increase in price, it could be a sign that the project team is engaging in market manipulation to artificially boost trading volume, which often doesn’t lead to a rise in the token’s price.