However, if either the sellers or the buyers find the price wrong, there will be little bid or ask. As a consequence, the volume goes down. The price needs to be readjusted in order to find a new equilibrium.
This is why speculators pay attention to volume. A diminishing volume indicate that a big move is about to occur.
This is of particular interest when there has been a flash crash, with prices restored to its former level. If volume remains healthy, things may remain stable. However, if there is diminishing volume, a real crash is increasingly likely to follow.
Furthermore, if prices change on diminishing volume, chances are that the price move is in the wrong direction. The correction will be in the opposite direction. If prices change on increasing volume, the change is in the right direction, and is likely to continue.
Unfortunately for Bitcoin holders, the recent all time high reached after the flash crash from a week ago has been on diminishing volume. A dramatic price drop in the near future appears increasingly likely.
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| A piece of brass pretending to be a store of value |
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