Bitcoin Nears the US$71,000 Threshold While Retail Investors Maintain Caution

On the 1st of November, 2024, amid New York’s bustling activity, Bitcoin approaches its all-time peak price, flirting with the $71,000 mark. Interestingly, this surge in value comes at a time when typical retail investors are conspicuously absent, leading to new market dynamics where price leaps are not fueled by their usual participation.

The major cryptocurrency platform Coinbase highlighted reduced retail trading activity as a key factor behind its third-quarter earnings not meeting expectations. “The prevalent bearish sentiment this year has undoubtedly disincentivized traders,” commented data analyst Adam Morgan McCarthy from Kaiko.

Coinbase cautioned about the consequences of crypto price volatility in October, predicting that it might impact the following quarter’s outcomes negatively. As Bitcoin advances, the expected revenue for Coinbase from their subscription and services could decrease by 7% from the previous quarter to $505 million to $580 million. This is due to a 10% decrease in Ethereum’s price compared to the third quarter and lower interest rates.

Retail participation continues to be subdued, with many investors still reluctant to re-enter the cryptocurrency trading market. Following its earnings report and unmet profit expectations, Coinbase shares experienced a 9% decline on Thursday.

According to Volmex, a data provider, Bitcoin’s volatility has decreased by 40% since 2020 up to September, a trend partially attributed to the influx of larger institutional investors. Major sell-offs, including actions by the German government and the collapse of entities such as Mt. Gox, have exacerbated the current market skepticism, as observed by Morgan McCarthy.

The trend is not isolated to Coinbase; PayPal also reported a nearly 11% drop in customer cryptocurrency holdings from one quarter to the next, despite Bitcoin’s price rise. This shift underscores the growing influence of institutional players in the sector. Data from CryptoQuant suggests that so-called “whale” demand for Bitcoin spot ETFs is double that of retail counterparts.

However, not all indicators point towards a complete downturn in retail sentiment. “Volumes have started to show recovery,” McCarthy stated. He reports that Bitcoin transaction volume has seen a sharper increase on Coinbase compared to Binance, hinting at a potential revival of retail interest.