The paper aims to confirm the existence of short- and long-term relationships among the strength of a trend and the volume in bullish and bearish cryptocurrency markets. Build on Wilder’s algorithm and along with prices, the average directional movement index was calculated, and upward and downward trend terms were ascertained. No long-term relationship was found to take place among the strength of a trend and the volume in both bullish and bearish markets. Therefore, trends do not proceed to volume changes. Although, a long-term relationship is present among volume and trend—but only for the downward trend—with an adjustment speed of 87%. In the short term, a statistically notable but very weak reliance is disclosed; hence, the conclusion that trend strength is insensitive to volume changes can be gained.
Efficient investments in and effective navigation of financial markets require knowledge of not only several types of assets but also an understanding of the relationships between many dimensions, such as price, volume, volatility, risk, and others. One of the most popularly used and analyzed dimensions is the relationship between price and volume. Never trust a breakout that is not along with a significant increase in volume Weinstein (1988) wrote. Volume analysis allows for understanding the source of the price change and confirms or nullify a given trend direction and trend quality.
The volume discloses when professional investors with huge portfolios buy and sell stocks. No increase in turnover when overcoming a notable price level might be a sign of the false signals coming from the market, which might point out that smart money is trying to distribute stocks at a low cost. Volume–price dynamics are generally used by investors who trade equities, currencies, and commodities on all types of markets—developed and mature—by speculators playing derivatives, such as futures or options, and by persons investing in bonds, among others.