Bitcoin is now hovering around $71,000, getting closer to its record. However, the surge in price conceals a change in the market that has caused retail traders to miss out on the rally.
Consider Coinbase. According to the exchange, a decline in retail trading contributed to the third quarter’s lower-than-expected revenue.
Adam Morgan McCarthy, an analyst at the data company Kaiko, told DL News that there was a lot of negative sentiment this year in particular, which probably discouraged traders.
Coinbase cautioned, though, that volatile cryptocurrency prices in October will also be a challenge this quarter.
According to Coinbase, the company’s retail subscription and services division is expected to generate between $505 million and $580 million in revenue in the fourth quarter.
Following a 7% quarterly decline in revenue in that division, Coinbase stated that the outlook “reflects certain headwinds including a 10% price decline in Ethereum in October compared to the third-quarter average, as well as lower interest rates.”
It indicates that individual traders have avoided trading cryptocurrencies and have not yet made a comeback, at least not in large numbers.
The forecast alarmed investors, as did the missed earnings targets. On Thursday, the stock dropped 9% in New York.
Coinbase claimed that fewer investors visited the exchange as a result of reduced volatility and declining cryptocurrency prices.
Bitcoin’s volatility has decreased by 40% between 2020 and September, according to data from Volmex, which was flattened by the entry of larger institutional investors and spot cryptocurrency exchange-traded funds.
Morgan McCarthy went on to say that significant selling events, such as those from the German government and defunct cryptocurrency companies like Mt. Gox, contributed to the gloom.
Coinbase isn’t the only one
Even though Bitcoin increased during the second and third quarters, the massive payments company PayPal saw a nearly 11% decline in the amount of cryptocurrency it held on behalf of its clients.
This is due to the fact that institutional investors are controlling a larger portion of the market and influencing prices more than their retail counterparts.
The demand for Bitcoin spot ETFs from so-called whales has doubled over the last year, according to research firm CryptoQuant.
Nevertheless, the retail trading scene does have some positive aspects.
“Volumes have somewhat recovered,” Morgan McCarthy stated. “For example, Coinbase’s Bitcoin volumes grew more quickly than Binance’s.”
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