Coinbase, a leading cryptocurrency exchange, is encountering a notable shift in market dynamics as its trading volumes decline despite the rising Bitcoin (BTC) price. The fading retail Fear-of-Missing-Out (FOMO) factor is driving a disconnect between BTC’s price and Coinbase’s volumes, according to a research report by Mizuho Securities.
Historically, the price of Bitcoin has influenced increased retail engagement, with surging BTC prices prompting investors to participate. However, the Mizuho report suggests that retail FOMO may be waning, creating an unprecedented disparity between Bitcoin’s price and Coinbase’s volumes.
Analysts, led by Dan Dolev, noted that “Trading volumes on COIN have historically tracked in tandem with changes in the price of Bitcoin.” For instance, both peaked in the fourth quarter of 2021, with Coinbase volumes reaching nearly $550 billion and the average Bitcoin price exceeding $55,000.
However, the report highlights a significant shift starting in the first quarter of 2023, characterized by a “stark bifurcation between COIN volumes and the price of Bitcoin.” During this period, Coinbase’s volumes dropped from $145 billion to $92 billion by the second quarter, and they are projected to decline to around $80 billion in the third quarter. Meanwhile, the average Bitcoin price rose to $28,500.
Mizuho suggests that this trend signals potential retail customer fatigue. Unlike previous market cycles, the report notes that the fear of missing out no longer motivates investors to trade Bitcoin when its prices rise, as it did in the past. This change in behavior could pose challenges for Coinbase, as approximately 95% of its transaction revenue comes from retail trades.
The investment bank maintains an underperform rating on Coinbase’s stock and has set a price target of $27. At the time of publication, Coinbase shares were trading at $82.49. Despite a 125% increase in the stock’s value this year, the report suggests that the recent rise in shares is unsustainable, and a reality check for the company may be on the horizon. Meanwhile, Bitcoin has seen a nearly 60% increase in its price during the same period.
