Written by Medha Singh
(Reuters) – What happened to the army of retail traders that once drove Bitcoin's biggest rally?
US cryptocurrency exchange Coinbase reported consumer transaction volume of just $56 billion in the first quarter of 2024, when Bitcoin soared to a record high of nearly $74,000.
This represents a return to retail interest and is about double the level in the final quarter of last year, but significantly higher than the $133.75 billion quarterly average of the previous similar bull market in 2021. It's below.
Retail investors have endured a rough 2021 as coronavirus lockdowns, cheap money and personal savings pushed up the price of “meme” stocks and triggered bouts of intense FOMO, or fear of missing out. He was in charge of the upheaval. In contrast, the recent rally was a more solemn and institutional event, driven by the birth of the US Bitcoin exchange-traded fund.
“This is the multi-million dollar question in crypto right now: When will retail traders come back?” said Michael Linko, an analyst at Delphi Digital.
In another sign of the retail setback, Google Trends data shows search interest in the term “Bitcoin” in March was only half of its 2021 peak.
Some small investors are still enduring the chill of a crypto winter that lasted more than two years, when Bitcoin languished between $20,000 and $30,000.
The collapse of well-known crypto companies such as Three Arrows Capital, Celsius Network, and FTX has also left billions in customer funds trapped, and the company's founder, Sam Bankman Freed, sentenced to prison for fraud. Sentenced to 25 years.
“The main reason for the decline in activity is the lessons learned through the disastrous year of 2022,” said K33 Research analyst Vetr Runde.
“The infection and collapse of the majority of retail lending platforms has shown that there is considerable risk hiding behind attractive yields.”
Some market participants believe that Bitcoin, which accounts for more than half of the $2.26 trillion digital asset market capitalization, has seen investors lock in profits in Bitcoin and purchase riskier altcoins such as No. 1. We expect there will be a rotation period to determine the 2 Cryptoether etc.
In fact, Ether is lagging behind its larger rival Bitcoin and has yet to surpass its 2021 peak.
John Glover, chief investment officer at crypto lending platform Reddon, said: “People are now looking at cryptocurrencies that are safe and secure, rather than just jumping into crypto blindly based on what seems to be trending at the time. “I've been paying attention to what assets I can invest in.”
It remains to be seen whether or when speculative crypto traders will return to the market in earnest.
Bitcoin's current fall to $62,809, 15% below its all-time high in mid-March, is a reminder of the extreme volatility and risk associated with this asset.
“The cryptocurrency meme is that Bitcoin needs to reach $100,000 for retail to come back,” said Delphi Digital’s Linco. “No one knows if it's a magic number, but you need to hit on a number that really causes FOMO.”
(Reporting by Medha Singh in Bengaluru; Editing by Vidya Ranganathan and Pravin Char)
