Cryptocurrency trading volumes have plummeted amid a dreadful first half of the year for the industry.

Spot and derivatives volumes have declined across exchanges, falling more than 15% since May to around US$4.2-trillion and reaching the lowest since January last year.

The month of June alone saw spot volumes drop nearly 28% to $1.41-trillion as bitcoin tumbled, the lowest since December 2020, according to data compiled by CryptoCompare.

Meanwhile, derivatives trading volumes were off by 7% during the month, the lowest since July 2021. Derivatives are hugely important in the crypto space, making up more than half of the market.

To market watchers, the trend makes sense considering declines in bitcoin and ether, both of which have fallen over 70% from last year’s all-time highs. Bitcoin tumbled 15% on 18 June to $17 599, the lowest price since late 2020. It reflects investors turning cautious.

“Volume has declined given the reduced excitement from investors in a cyclical bear market,” Katie Stockton, co-founder of Fairlead Strategies, said in a message. “Until crypto prices break out of their bear-market cycle, which could take months, we can expect volume to be below average.”

Cryptocurrencies have, along with other riskier assets, had a hard time this year amid a higher-rate environment, whereby central banks around the world are trying to tamp down red-hot inflation. The MVIS CryptoCompare Digital Assets 100 Index of some of the largest coins is down 60% this year. Bitcoin rose 2.8% to $20 208 on Thursday.

Lowest

Bitcoin futures contracts last month at the CME, with volume of $29-billion, reached their lowest volume traded since July of 2021, while ether’s fell over 20%, indicating a “fall in speculative activity”, according to CryptoCompare. The drop-off in trading volume has taken place across many platforms, including Binance, OKX and FTX.

The trend marks a reversal from the past two years, when retail investors, stuck at home during lockdowns or looking to capitalise on rising prices, swarmed into cryptos and other risky bets.

“For moms and pops, when you see something sell off that much, they probably aren’t as interested,” Chris Gaffney, president of world markets at TIAA Bank, said in an interview. “They hate buying something that’s in a free-fall or even something that has fallen and stabilised. They want to see that first leg up.” — Enrique Roces, (c) 2022 Bloomberg LP