In the process of investing in cryptocurrencies like Bitcoin, we often come across various professional terms and data indicators. Among them, the turnover rate and trading volume are two very crucial indicators. Today, let's have a good chat about what a high turnover rate in the crypto market indicates and what the relationship is between the turnover rate and trading volume.

What Does a High Turnover Rate in the Crypto Market Indicate?

First of all, we need to know what the turnover rate is. Simply put, the turnover rate is the ratio of the trading volume of a certain cryptocurrency to its total circulating supply within a certain period of time. So, what does a high turnover rate mean?

High Market Activity

When the turnover rate of a cryptocurrency is high, it means that many people are buying and selling this coin in the market. Frequent trading makes the market as lively as a bustling bazaar, full of vitality. This is often a positive signal, indicating that this cryptocurrency has attracted the attention of many investors and there may be good investment opportunities.

Large Price Fluctuations

A high turnover rate also means that the price may fluctuate greatly. Since there are more buyers and sellers, the balance of power between the bulls and bears can change at any time. When the buyers gain the upper hand, the price may rise; when the sellers take control, the price may fall. Therefore, in the case of a high turnover rate, investors should pay special attention to price risks.

Frequent Chip Transfer

A high turnover rate may also indicate that the transfer of chips (cryptocurrencies held by investors) between different investors is relatively frequent. For example, some early investors may think they have made enough profits and sell their coins, while new investors believe that the coin still has room for growth and buy them. This transfer of chips may affect the price trend of the cryptocurrency.

What's the Relationship between the Turnover Rate and Trading Volume in the Crypto Market?

Although both trading volume and turnover rate are related to trading, there are still some differences between them.

Trading Volume is the Foundation

Trading volume refers to the actual number of a certain cryptocurrency traded within a certain period of time. It is an important indicator to measure the scale of market trading. The larger the trading volume, the more active the market is. For example, if the trading volume of a cryptocurrency is large in one day, it means that many people are buying and selling this coin on that day.

The Turnover Rate Can Better Reflect Activity

The turnover rate takes into account the factor of the total circulating supply on the basis of trading volume. For the same trading volume, the turnover rate may vary greatly for different cryptocurrencies with different total circulating supplies. For example, if the trading volume of two cryptocurrencies is both 1,000, but the total circulating supply of one cryptocurrency is 10,000 and that of the other is 100,000, then the turnover rate of the former will be much higher than that of the latter. Therefore, the turnover rate can more accurately reflect the activity of a cryptocurrency in the market.

They Influence Each Other

Trading volume and turnover rate influence each other. Generally speaking, the larger the trading volume, the higher the turnover rate. Because a large trading volume means that more coins are being traded in the market, and the turnover rate will naturally increase when the total circulating supply remains unchanged. Conversely, a high turnover rate may also attract more investors to participate in trading, thereby further increasing the trading volume.

In crypto investment, it is very important to understand these two indicators, the turnover rate and trading volume. They can help us better judge the market trend and seize investment opportunities. Of course, investment always involves risks. We cannot make decisions based solely on these two indicators. We also need to conduct comprehensive analysis by combining other factors, such as market trends and the fundamentals of the project. I hope today's science popularization can be helpful to you and make our investment journey in the crypto market smoother!