A Bifurcation between Bitcoin Price and Coinbase Volumes Suggests Retail Customer Disengagement
A research report by Mizuho Securities has highlighted a notable divergence between the price of bitcoin and trading volumes on the Coinbase exchange. Historically, the two have moved in tandem, with peak volumes coinciding with higher bitcoin prices. However, in the first quarter of 2023, a stark shift occurred, with Coinbase volumes dropping while bitcoin prices continued to rise. The report suggests that this indicates potential fatigue among retail customers, with fear-of-missing-out (FOMO) no longer driving trading activity. As Coinbase generates a significant portion of its revenue from retail trades, this disengagement could pose a problem for the exchange. Mizuho has given Coinbase an underperform rating and expects a reality check to follow the recent rise in its shares.
Hot Take: Retail Investors Losing Interest in Bitcoin Trading
The recent divergence between bitcoin price and Coinbase volumes suggests that retail investors are becoming less interested in trading bitcoin. In the past, rising bitcoin prices would attract retail traders hoping to capitalize on fear-of-missing-out (FOMO). However, this dynamic appears to be changing, with retail customers showing signs of fatigue. This poses a challenge for Coinbase, as it heavily relies on retail trades for its transaction revenue. Mizuho Securities has issued a warning, stating that the current rise in Coinbase shares is unsustainable and expects a reality check to follow. This shift in retail engagement could have implications for the broader cryptocurrency market and its future growth.
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