Retail Investors Slowly Return to Crypto Markets
Staff Writer • 2024-02-20
In an interesting shift of trends, small investors, often referred to as mom-and-pop investors, are gradually making their way back into the cryptocurrency space, albeit with more caution than the fervent enthusiasm observed during the last bull market three years ago. A Cautious Re-Entry Data from major U.S. crypto exchanges indicates a resurgence of interest among retail investors. Coinbase Global Inc., a leading name in the crypto exchange domain, reported a significant 60% increase in net consumer transaction revenue in the fourth quarter compared to the same period the previous year, with an 80% increase over the third quarter. Similarly, Robinhood Markets, known for catering to retail users, witnessed a staggering 242% jump in crypto notional volumes in December from the previous year. These statistics suggest a growing confidence among individual traders, who had previously suffered substantial losses due to the crypto-price collapse in 2022. Triggered by ETF Launches and Bitcoin's Rally The spark for this renewed interest appears to be linked to the January launch of U.S. exchange-traded funds (ETFs) investing directly in Bitcoin, alongside Bitcoin's price more than doubling last year. Despite the historical volatility associated with cryptocurrencies, the prospect of substantial gains is enticing consumers to re-engage with the market. 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." Retail's Critical Role and Tentative Signs of Engagement Retail traders have always played a vital role in the crypto market, significantly contributing to the revenues of platforms like Coinbase during previous bull runs. However, indicators such as web searches for "Bitcoin" and downloads of top crypto-exchange apps suggest that while interest is growing, it has yet to reach the peak levels of the past bull market. For instance, Binance saw an increase in app downloads, yet the figures are still far below the heights achieved in 2021. Future Prospects: Halving Event and Continued Growth The cryptocurrency sector is also buoyed by anticipation for the Bitcoin halving event expected in April, which historically has led to increased retail engagement and market growth. Coinbase CFO Alesia Haas remarked on the positive momentum drivers and the potential for more retail engagement following the halving. As the year progresses, if the upward trend in crypto prices continues, the allure for mom-and-pop investors to re-enter the market could become irresistible. Analysts like Alyssa Choo from Bitwise emphasize, "As the crypto market cap and trading volumes go up, retail trading goes up as well. Everyone wants to be a part of the bull market."
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