In the cryptocurrency market, fund volume indicators are an important basis for analyzing market conditions. When Powell announced the prohibition of holding Bitcoin, it was like dropping a heavy bomb on the calm surface of the cryptocurrency world, triggering violent market turbulence from various angles of fund volume.
1. Fund flow direction
From the perspective of fund flow signals, the connection between the cryptocurrency market and traditional financial markets is becoming increasingly tight. The Federal Reserve's policy direction has a significant influence on the fund allocation of large institutional investors. Due to their large fund sizes and cautious decision-making processes, large institutional investors pay particular attention to the macro policy environment when weighing risks and returns. Powell's remarks led these institutions to reassess the position of cryptocurrencies in their investment portfolios. When traditional financial markets face increasing policy uncertainty, institutional funds typically flow from high-risk assets (such as cryptocurrencies) to relatively stable assets (such as government bonds), which directly leads to a reduction in fund supply in the cryptocurrency market, reflected in the contraction of buying funds in volume indicators.
2. Market depth and trading activity
In terms of market depth and trading activity, the market depth in the fund volume indicator reflects the scale of trades that can be accommodated without causing significant price fluctuations. Powell's remarks caused the market depth in the cryptocurrency market to quickly become shallow, leading to widespread investor panic and a shift towards short-term and emotional trading behavior. Normal market depth should support large buy and sell orders without causing significant price fluctuations, but at this time, small sell orders may trigger a noticeable price drop, indicating reduced market depth. Meanwhile, trading activity also declines, and volume and other volume indicators show sluggish fund flow across the market, suppressing the willingness of both buyers and sellers to participate.
3. The relationship between price and volume
There is a close relationship between price and fund volume. Normally, a price increase accompanied by enlarged transaction volume indicates that fund inflows are pushing prices up; a price decrease with increased transaction volume may indicate fund withdrawals. The market turmoil triggered by Powell's remarks disrupted this relationship, as sharp price declines are often accompanied by sudden increases in transaction volume (panic selling), followed by a rapid shrinkage in volume, reflecting a loss of market confidence. This state of imbalance makes it difficult for the market to return to normal operating rhythm in the short term, with volume indicators remaining sluggish, further exacerbating the bearish atmosphere.
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