Crypto ‘Winter’ Slows Volume on Some of the Biggest Exchanges

Yueqi Yang

08 Jan 2022, 12:33 PM IST

A novelty bitcoin decoration on a Christmas tree. (Photographer: Andrey Rudakov/Bloomberg)

(Bloomberg) -- Some of the most popular cryptocurrency exchanges are starting to note what could be a troubling sign -- individual investors are heeding to the industry mantra of “hodl” and shying away from trading as the crash in digital-asset prices deepens.

FTX.US, the American affiliate of eponymous trading juggernaut, has seen lower trading volumes “across the board” in the last week, FTX.US President Brett Harrison said in an interview. “To me it looks like we’re in the period of just decreased volume and subdued trading activity following drops in general.”

Following price declines, “usually you will see a lot of quick volume from people trying to sell off during a panic, but then a longer period of decreased volume as people shy away from the market after the volatility,” Harrison said. There needs to be “more confidence” from retail investors for crypto trading volumes to come back, he said.

Coinbase Global, Inc., the largest U.S. crypto exchange, has also seen a decline in Bitcoin spot daily volumes in the past week, during which Bitcoin fell from about $47,000 to as low as $40,634. Shares of Coinbase closed at $232, down from as high as $357 in November.

Trading fees make up the majority of Coinbase’s revenue. Coinbase shares fell after reporting lower-than-expected third-quarter revenues in November, due to lower coin prices and trading volume.

“Declining price could drive lower trading volume when it gets to the point to discourage traders to get engaged. There is a possibility that digital assets price to go flat such as getting into a crypto winter after a price decline,” said Owen Lau, an analyst at Oppenheimer & Co.

While it’s possible the first quarter may be another “mini crypto winter,” there appears to be an upward trend as digital assets adoption continues, Lau said. Prices might also decline so much that they look cheap and entice buyers to come back in.

Mike Novogratz, CEO and founder of Galaxy Digital Holdings, told CNBC yesterday that he was waiting a little bit longer to buy crypto. Today, as Bitcoin hovers at $41,990, he tweeted that “We entered the buy zone.”