Crypto liquidity is a myth.
ChatGPT describes crypto liquidity as:
Crypto liquidity refers to the ease with which a cryptocurrency can be bought or sold on the market without significantly affecting the overall market price. High liquidity means that there are many buyers and sellers in the market, and it is easy to buy or sell large amounts of the cryptocurrency at the current market price. Low liquidity means that there are fewer buyers and sellers, and it may be difficult to buy or sell large amounts of the cryptocurrency without significantly affecting the market price.
When you see the volume of certain crypto go up, you assume whales are buying up the market. However, it may not be the case.
Because there are not regulations, crypto trading are likely a wash trading in which bots can trade multiple times per second and without notice from the blockchain.
There are also many crypto lending services that highly leverage crypto and perform arbitration around the exchanges.
After the FTX collapses, crypto lending services are dying out and liquidity will dry a bit. But those will come back no time.
Therefore, in my opinion, volume is not a trustable indicator of the crypto market.
Photo by Pawel Czerwinski on Unsplash