Is it a bargain hunting opportunity when the volume shrinks and the 30-day moving average is not broken? How to confirm?

Shrinking volume with a stable 30-day MA may signal consolidation or reversal, offering potential bargain opportunities if confirmed by RSI, candlesticks, and on-chain metrics.

Jun 18, 2025 at 10:07 am

Understanding Volume and Moving Averages in Cryptocurrency Trading

In the cryptocurrency market, traders often rely on technical indicators to make informed decisions. Two key elements that are frequently analyzed together are trading volume and moving averages, particularly the 30-day moving average (MA). When volume shrinks while the 30-day MA remains intact, it can signal a potential consolidation phase or even a reversal. This scenario raises an important question: is this a bargain hunting opportunity?

Volume is a measure of how much of a given asset has been traded over a specific time period. It reflects market interest and participation. A shrinking volume typically indicates decreasing interest or indecision among traders.

The 30-day moving average, on the other hand, smooths out price volatility by averaging the closing prices over the last 30 days. It acts as a dynamic support or resistance level. If the price doesn’t break below this level during a pullback, it might suggest underlying strength in the trend.

Interpreting Shrinking Volume with a Stable 30-Day MA

When both conditions occur — volume decreases and the 30-day MA holds — it may indicate that selling pressure is waning without a significant breakdown in support. This situation is often seen as a possible accumulation zone for savvy traders.

• Reduced volume suggests fewer sellers are active, which could mean that bears are losing control.
• Price holding above the 30-day MA implies that the broader trend is still intact and buyers may be stepping in at this level.

However, interpreting these signals in isolation can be misleading. Traders should always cross-verify with other tools such as candlestick patterns, relative strength index (RSI), or Fibonacci retracement levels to avoid false positives.

Confirming the Bargain Hunting Signal

To confirm whether the current market condition presents a genuine bargain hunting opportunity, follow these steps:

• Check the RSI indicator – Look for oversold conditions (below 30) to see if the asset is undervalued.
• Observe candlestick formations – Bullish reversal patterns like hammer, engulfing, or morning star near the 30-day MA increase the probability of a bounce.
• Monitor order flow and liquidity – Use depth charts or on-chain data to check if large buy orders are accumulating near the MA line.
• Cross-reference with higher timeframes – Confirm that the daily chart aligns with the weekly trend to avoid countertrend entries.

By combining these techniques, you can build a more robust case for whether the current environment supports a buying opportunity.

Using On-Chain Metrics to Validate the Signal

On-chain metrics provide deeper insights into market structure beyond what price and volume alone can reveal. Tools like Santiment, Glassnode, or CryptoQuant offer valuable data points that can help confirm the strength behind the price action.

• Exchange inflows/outflows – If coins are being withdrawn from exchanges during low volume, it may indicate long-term holders accumulating.
• Holders' behavior – Analyze metrics like "supply held by profit" or "net unrealized profit/loss" to understand investor sentiment.
• MVRV ratio – Market Value vs Realized Value can highlight whether the asset is trading below its fair value.

These metrics help filter noise from meaningful market movement and add another layer of confirmation before entering a trade.

Executing the Trade with Risk Management

Once the setup appears favorable, executing the trade requires careful planning and discipline. Entering too early or without proper risk controls can lead to losses even if the overall thesis is correct.

• Set a clear entry point – Preferably after a bullish candle closes above a key level or after a confirmed reversal pattern.
• Place a stop loss – Just below the 30-day MA or the recent swing low to protect against a breakdown.
• Use position sizing – Allocate only a portion of your portfolio to this trade based on confidence level and volatility.
• Plan for multiple take-profit levels – Capture partial profits at key resistance zones and let the rest ride if momentum continues.

This structured approach ensures that even if the market moves against you temporarily, your downside is controlled.

Frequently Asked Questions

Q1: Can I use the same strategy on altcoins as on Bitcoin?

Yes, but with caution. Altcoins often have less liquidity and more volatility, so adjusting your stop loss and position size accordingly is crucial. Also, correlation with Bitcoin should be considered when timing entries.

Q2: How long should I wait for a breakout after volume shrinks?

There's no fixed timeframe. Some setups resolve within a few days, while others may take weeks. Monitoring price action closely and using alerts can help you react quickly when momentum resumes.

Q3: What if the 30-day MA gets broken slightly but volume remains low?

A minor breach without strong volume might be a false breakdown. Wait for a retest or confirmation candle before acting. Avoid chasing price unless the trend clearly resumes.

Q4: Is it safe to enter a trade based solely on technical analysis?

While technical analysis provides valuable clues, combining it with fundamental factors (like project updates or macroeconomic events) improves decision quality. Always consider the broader context before committing capital.