There has been a significant decline in crypto-wide trading volume following its peak on February 27th. Back then, traders were optimistically purchasing tokens as prices dipped.

However, in the two weeks that followed, market cap declines have contributed to a noticeable shift in trader sentiment.

Exhaustion, Hopelessness, And Capitulation

According to Santiments analysis, this shift can be characterized by exhaustion, hopelessness, and capitulation. The drop in trading volume has continued, even amid brief price recoveries such as the one observed on Wednesday.

This declining volume suggests a growing sense of caution among traders, indicating that many remain unconvinced that recent upward price movements will sustain. This lack of confidence is reflective of uncertainty, with fewer investors willing to buy at current levels due to concerns about potential losses.

Additionally, declining trading volume during minor price rebounds can serve as an early warning of weakening market momentum. Without significant buying interest to support price gains, any recovery may prove temporary, leaving prices vulnerable to another downturn. While falling volume during brief rebounds is not inherently bearish, it does reflect hesitation from both retail and institutional traders.

If both groups hold back, waiting for the other to re-enter the market and boost prices, this indecision may lead to stagnation with a slight downward bias.

For a stronger and more sustainable recovery, Santiment said that traders typically look for rising prices accompanied by increased trading volume. Until this occurs, prevailing market sentiment is expected to remain cautious, and hesitant investor behavior will likely dominate crypto trading patterns in the short term.

Stablecoin Activity Surges

On a positive note, the total amount of tokens transferred for all stablecoins is surging, which points to a potential accumulation by large investors. Historically, such spikes occur during consolidation phases rather than price declines. Such a trend could mean that major investors are likely absorbing market shocks through over-the-counter (OTC) transactions.

Increased active addresses further indicate increased network activity. With extreme fear sentiment dominating, this accumulation may point to a potential recovery phase. Once accumulation stabilizes, a futures market rebound is expected. Given the current subdued sentiment, any rise in futures prices is unlikely to overheat, but a short squeeze could accelerate recovery significantly.