Timothy Lee got it completely wrong.

It should be noted that I quoted not Timothy Lee, but "Nick Steves" who commented on Timothy Lee's article.

If the ratio is trending downward, then trade volume is increasing faster than BTC tx volume.

Perhaps my understanding of ratios is incorrect, but

Given x:y, 2:5 is a lower ratio of x to y than 3:5. Whereas 4:5 is a higher ratio of x to y than 3:5.

So if we are talking trade volume:tx volume, if the ratio is trending downward, that would mean there is fewer [first number (trade volume)] compared to [second number (tx volume)].

I could have it backwards but I thought that what I just described was standard practice when talking about ratios. You are saying that we should reverse this, and "ratio trending downward" means that there is less of [second value (tx volume)] compared to [first value (trade volume)]? Strange.

I agree that to really nail something like this, we'd have to consider how many blockchain transactions take place on average, per X

BTC trading volume, specifically for trading purposes.