Trading volume is the number of units of an asset that change hands in a set period, such as an hour or a day. That means shares for a stock, coins or tokens for a cryptocurrency, and contracts for futures. The US Commodity Futures Trading Commission (CFTC) defines volume as "the number of contracts traded during a specified period of time." Volume shows how active a market is. In crypto it also needs checking, because research shows that much of the volume some venues report comes from wash trading and not from real buyers and sellers.
How volume is counted
Every trade has a buyer and a seller, but volume counts the trade once, by its size. Here is an example:
- A trader buys 50 shares in the morning and sells the same 50 shares in the afternoon.
- That makes two trades of 50 shares each.
- The day's volume from this activity is 100 shares, even though only 50 distinct shares moved.
Volume can be counted for any traded instrument: stocks, bonds, futures, options, commodities and crypto assets. It is usually quoted in two ways:
- Unit volume: how many shares, coins or contracts were traded.
- Notional (dollar) volume: units multiplied by price. Crypto data sites often show this as 24-hour volume in US dollars.
Volume in crypto markets
Crypto trades around the clock with no daily close, so "daily volume" usually means a rolling 24-hour window. Spot volume counts coins or tokens. Derivatives volume counts contracts, or the notional value behind them.
Volume versus open interest
In futures and perpetual markets, volume is often confused with open interest. They measure different things:
- Volume counts every contract traded during the period, including trades that open a position and trades that close one.
- Open interest is, in the CFTC's words, "the total number of futures contracts long or short in a delivery month or market that has been entered into" and not yet closed out. It is a snapshot of the positions still open, not a count of activity.
A market can show heavy volume while open interest stays flat. That happens when traders mostly close existing positions or trade them back and forth instead of opening new ones.
How much weight can this volume figure carry?
Answer a few questions about a crypto volume number you are reading to see how far the article's research says you can rely on it.
Where does the volume figure come from?
- One regulated venue → next question
- One unregulated venue → Treat it with caution
- Several independent sources → next question
- On-chain trades on a decentralised exchange → Visible, but not proof of real trading
Do those independent sources report roughly the same volume?
- Yes, they agree → next question
- No, one venue is far higher than the rest → Treat it with caution
What are you comparing the figure with?
- The same asset's own volume history → next question
- Other assets' headline volume numbers → Compare like with like
In a futures or perpetual market, are you reading volume as the number of positions still open?
- Yes, I read it as open positions → That is open interest, not volume
- No, I read it as trading activity in the period → A stronger signal
Volume from a single unregulated venue is the weakest signal. In the 2023 Management Science study of 29 centralised exchanges, wash trading averaged over 70% of reported volume on unregulated exchanges, while regulated ones showed patterns typical of traditional markets.
Public settlement makes wash trades visible but does not prevent them. A 2021 study of two early order-book decentralised exchanges found at least about $159 million of wash trading, in more than 30% of traded tokens. Self-trades between linked wallets still count as volume.
Headline numbers from different assets and venues may include very different amounts of fake volume. Compare the asset's volume with its own history instead.
Volume counts every contract traded in the period, including trades that close positions. Open interest is a snapshot of positions entered into and not yet closed out. Heavy volume can come with flat open interest when traders mostly close or trade existing positions.
Volume from regulated venues, or from several independent sources that agree, read as trading activity and compared with the asset's own history, is the stronger signal the article describes. It shows how much trading sat behind a price move.
This checks only where a volume figure comes from and how you read it, using the studies in the article. Those studies cover the periods and venues they sampled and may not describe current markets, and the check cannot detect wash trading in any specific figure.
Why volume matters to traders
Volume tells you about liquidity and participation. When an asset trades actively, it is usually easier to buy or sell without moving the price much. When it trades thinly, a single order can shift the price and cause more slippage.
Many technical indicators, such as moving averages, are built from price alone. Volume is a separate input. It shows how much trading sat behind a price move, which price data cannot show.
Why crypto volume is easier to fake than price
The CFTC defines wash trading as "entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without incurring market risk or changing the trader's market position." In US futures markets this is unlawful under Section 4c(a) of the Commodity Exchange Act. Many crypto venues fall outside that regime.
Three pieces of evidence, oldest first:
- March 2019: Bitwise Asset Management told the US Securities and Exchange Commission, while seeking approval for a bitcoin ETF, that about 95% of reported spot bitcoin volume was fake or non-economic. Of 81 exchanges it reviewed, it found genuine volume concentrated on about 10. Later academic work has questioned how accurate the exact estimate is.
- 2021: Friedhelm Victor and Andrea Marie Weintraud (TU Berlin) studied two early order-book decentralised exchanges on Ethereum and published the results at The Web Conference 2021. Even though every trade was recorded publicly on-chain, they found:
- at least about $159 million of wash trading - wash trades in more than 30% of traded tokens.
Public settlement makes wash trades visible. It does not prevent them.
- **December 2022 (NBER working paper) and 2023 (Management Science, vol. 69, no. 11):** Lin William Cong, Xi Li, Ke Tang and Yang Yang tested 29 centralised exchanges.
- Regulated exchanges showed trading patterns typical of traditional markets. - On unregulated exchanges, wash trading averaged over 70% of reported volume. - The authors estimated the fabricated volume at trillions of dollars a year, and found it improved exchange rankings and temporarily distorted prices. - To find fake trades, they looked for statistical fingerprints, such as unusual first-digit distributions and unnaturally rounded trade sizes.
What this means when you read a volume figure
- Treat volume reported by a single unregulated venue with caution.
- Volume from regulated venues, or volume from several independent sources that agree, is a stronger signal.
- Compare an asset's volume with its own history, not with other assets' headline numbers.
- On-chain data lets anyone check what was traded, but self-trades between linked wallets still count as volume.
Limitations: the wash-trading estimates cover the periods and venues each study sampled and may not describe current markets.
