Trading volume on crypto exchanges which include Coinbase Global and Binance hit a 31-month low in May despite a rally in the price of Bitcoin and other tokens. It’s a sign that a bull market in crypto isn’t getting everyday people excited enough to trade again.
Coinbase
(ticker: COIN) had $26.9 billion in volume in the spot market in May, according to data from The Block, while overall crypto exchanges had $439.5 billion in volume. Those were the lowest volumes since October 2020. Binance, the largest crypto exchange, had volume of $218 billion, the lowest level since November 2020. In the spot market, crypto is delivered immediately, though some exchanges also do robust business in crypto derivatives.
Volume on crypto exchanges has dropped for several months despite a recent uptick in token prices.
Bitcoin
‘s price has risen 63% this year to about $27,000, while the overall token market is up 44%. Since the beginning of May, token prices have sagged, with Bitcoin falling about 7.5%.
The drop in volume is bad news for Coinbase, whose bread-and-butter is still retail trading. In an effort to diversify revenue streams, the company has expanded programs that allow investors to post tokens in exchange for yield. It’s also announced an overseas derivatives exchange for institutional investors, and the company has made increasing profit from the reserves of its stablecoin,
USDC,
as interest rates have risen.
Coinbase didn’t immediately respond to a request for comment.
Shares of Coinbase this year are up 91% to $64.31.
Despite these pushes, the company is still mostly reliant on retail traders, at least for now, Mizuho analyst Ryan Coyne, whose firm has an Underperform rating on shares, said.
“In prior runs, you’ve seen euphoria and FOMO [or the fear of missing out] with retail. That has dissipated,” Coyne said.
To compensate, Coinbase has raised how much revenue they take from smaller retail trades, Coyne said, noting he’s doubtful that can continue as other brokers compete for a dwindling customer base.
It’s unclear why interest in crypto has faded, but there is at least one reason to believe that could change.
Analysts for J.P. Morgan in a research note on Thursday said they expect small investors could regain interest in Bitcoin as the token’s so-called halving approaches. That event, which cuts in half crypto miners’ reward for helping secure the Bitcoin network, occurs roughly every four years and has historically helped spur interest in the token and boosted prices. The next halving is expected to occur next year, in April or May.
“The Bitcoin halving event is one of the most anticipated events in the crypto space,” the J.P. Morgan analysts wrote.
Barring another catalyst, those 11 to 12 months could feel like eons for Coinbase investors.
Write to Joe Light at joe.light@barrons.com
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