The typical correlation between a rising bitcoin price and heightened retail engagement seems to be undergoing a radical alteration, as recent data presented by Mizuho Securities highlights an unprecedented divergence between bitcoin’s price and trading volumes on Coinbase. Given that past market behaviors saw investors lured into the market by FOMO as prices ascended, this odd decoupling sparks questions about market evolution and investor attitudes.
Within this context, previous statistics indicate a parallel rise between Coinbase trading volumes and bitcoin price. Both climaxed in the fourth quarter of 2021, for instance, when Coinbase volumes neared a staggering $550 billion, all while the average price of bitcoin surpassed $55,000. However, emerging trends suggest a stark shift.
Increasingly in 2023, as Coinbase volumes fell from $145 billion to $92 billion and are predicted to head towards roughly $80 billion in the third quarter, bitcoin soared to an average price of $28,500. Analysts infer this gap signifies a possible exhaustion among retail customers. And unlike former market cycles, the spike in bitcoin price no longer seduce investors with FOMO.
This decoupling signals a potential challenge for Coinbase, considering it derives about 95% of its transaction revenue from retail trades. If retail investors are indeed experiencing fatigue or moving away from FOMO-driven trading patterns, it threatens to upset the profit margins of major exchanges such as Coinbase.
Despite Coinbase shares having witnessed a startling 125% rise this year, paralleled with bitcoin’s near 60% ascent, Mizuho deems this upward trajectory to be unsustainable. The investment bank bestowed an underperforming rating on Coinbase stock, suggesting a more grounded projection with a price target of $27 per share. The dynamics of today’s market – the disconnect between bitcoin price and Coinbase volumes – illustrates a maturing market where investors are likely becoming more discerning and less reactionary in their trades.
Source: Coindesk
