Definition ∞ Volume analysis is a technical method that examines the quantity of an asset traded to understand market activity and price movements. This analytical approach assesses the total number of units of a cryptocurrency or digital asset exchanged during a specific timeframe, providing insight into the conviction behind price action. High trading volume accompanying a price increase or decrease suggests strong market participation and confirms the trend’s validity. Conversely, low volume during price movements may indicate a lack of market conviction or a temporary fluctuation.
Context ∞ Volume analysis is a staple in crypto news and market commentary, frequently used to validate price trends and anticipate market shifts. Reports often highlight significant volume spikes or contractions when explaining the strength of a rally or the potential for a reversal. Divergences between price and volume are closely watched for signals of impending trend changes. Interpreting volume data is crucial for discerning genuine market interest from speculative noise.
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