Question #307 ·
Why do Bitcoin trading volumes often spike during sharp price declines, and what does this indicate about market mood?
- Trading volumes spike during sharp declines as panic selling increases market orders Right answer
- Trading volumes spike during sharp declines because miners increase reward sales
- Trading volumes spike during sharp declines due to automated arbitrage systems selling
Why is this the correct answer?
This is correct because when prices drop quickly, many traders panic and place sell orders at once. The rush to exit positions drives up trading volume significantly. High volume during declines shows a fearful mood, as investors unwinding positions create a flurry of activity on exchanges.