The examination of the quantity of assets transacted in individual trades to discern market microstructure, participant behavior, and liquidity dynamics. In crypto, this analysis helps identify the presence of institutional versus retail activity and the impact of large orders.
Mechanism
Transaction data is aggregated and categorized by volume, revealing distribution patterns of trade sizes across different assets and trading venues. Statistical methods are applied to identify typical trade sizes, significant block trades, and their correlation with price movements or liquidity shifts.
Methodology
This analytical approach provides insights into market depth, potential price impact, and the presence of informed trading. By dissecting trade size distributions, analysts and algorithmic traders can adapt their execution strategies, optimize order routing, and predict short-term market reactions to large orders. This enhances trading efficiency and reduces adverse selection.
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