Crypto Retail Resurgence: Are Small Investors Returning?

Individual investors are cautiously dipping their toes back into the world of cryptocurrencies, though they’re not diving in headfirst like they did during the last bullish period three years ago.

Recent data from major US crypto platforms paints an encouraging picture: Coinbase Global Inc. reported a 60% increase in net consumer transaction revenue in the fourth quarter compared to a year ago, with an 80% surge over the third quarter. Meanwhile, Robinhood Markets Inc., catering primarily to retail users, saw a whopping 242% rise in crypto notional volumes in December compared to the previous year.

These figures suggest that everyday traders, who suffered substantial losses after the crypto market downturn in 2022, might be cautiously returning, driven partly by the excitement surrounding the launch of US exchange-traded funds (ETFs) focused on Bitcoin in January. Bitcoin’s price more than doubled last year amid the buzz, enticing consumers with the prospect of even greater profits, albeit at the risk of forgetting the inherent volatility of cryptocurrencies.

Kyle Doane, a trader at Arca, notes, “There are signs that the retail audience is starting to get back into the market, but not nearly to the extent of the last bull market yet.” Even stocks tied to crypto, like COIN and mining companies, are experiencing more volatility than many digital tokens.

Retail traders play a pivotal role in the crypto landscape, contributing significantly to platforms’ revenues during bullish phases. However, indicators like web searches for “Bitcoin” and downloads of top crypto exchange apps suggest that retail interest hasn’t fully recovered. While there was a spike in searches and app downloads around the ETF launch, they quickly tapered off afterward, returning to levels typical of bear markets.

Furthermore, despite some sequential increases in app downloads for platforms like Binance and Coinbase, they remain well below peak levels seen during the last bull run. For instance, Coinbase’s app downloads in the fourth quarter were only a fraction of what they were in the second quarter of 2021.

Looking ahead, investors are eyeing potential catalysts for another rally, including the Bitcoin halving expected in April, which historically has led to increased retail engagement. With Bitcoin trading at its highest levels in over two years, there’s growing optimism among market observers that if prices continue to climb—as they have so far this year—retail investors will find it hard to resist jumping back into the fray.

“As the crypto market cap and trading volumes go up, retail trading goes up as well,” noted Alyssa Choo, a crypto equities analyst at Bitwise. “Everyone wants to be a part of the bull market.”


Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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