Are Retail Traders Bored Now That Bitcoin is Less Volatile?

Bitcoin’s biggest problem as a payments currency is its wild volatility, with a long history of rising and falling as much as 10% in a day.

However, for bitcoin traders, the No. 1 cryptocurrency’s biggest problem is its current lack of volatility.

While the number of consumers investing in crypto increased dramatically in 2021, driving bitcoin — and many other cryptocurrencies — to new heights, its price is heavily affected by retail traders looking to make money on those shifts. And since June, bitcoin has been flat, stuck largely in the $18,000-$21,000 range after dropping from its November 2021 all-time high of $68,000

And that “cohort of retail-type investors who had fueled much of last year’s huge surge in prices have been missing in action,” Bloomberg said in early October.

That’s been seen broadly this year, with public exchange Coinbase reporting second-quarter trade volumes down about 50% to $217 billion. Retail buyers and sellers dropped much harder than institutional traders, down 68% versus 46%. But, Coinbase noted, big traders pay lower fees.

See also: Coinbase Upbeat Despite $1.1B Loss, as Shares Sink 10%

Worse, it noted that July trade volumes were even lower and that it expected significant declines in monthly users. It did not see a “mass migration” by customers, Morningstar Research equities analyst Michael Miller told Reuters at the time, but “its users are becoming more passive in their cryptocurrency investing.”

Nor were other exchanges doing much better. Binance saw a 50% volume decrease between mid-June and mid-July, Forbes reported. But Kraken was down more than 75% and Gemini bout 80%.

One notable exception, Forbes pointed out, was Binance.US, which saw only a 2% drop after suspending bitcoin trading fees in June.

Stock and crypto trading firm Robinhood saw a small gain in crypto trading in Q2, but its overall numbers were still down about 45% from the year earlier.

At least anecdotally, broader public interest over time in bitcoin is down as well, with Google searches dropping to levels not seen since 2020, before the bitcoin bull market began.

New Outlets Coming

For all that, it’s hard to put a very strong estimate of actual bitcoin trading numbers, as the amount of wash trading in the industry remains vast — a problem Securities and Exchange Commission (SEC) Chairman Gary Gensler has repeatedly cited as a reason not to license bitcoin exchange-traded funds (ETFs), which would also likely increase U.S. market participation.

In August, a Forbes analysis found that 51% of all bitcoin trades are “likely bogus.”

According to the crypto news source The Block’s Legitimate Index which seeks to weed out questionable exchanges, spot volume has been largely flat this year and well below the volumes seen when crypto prices were surging.

That said, there have been signs that interest is expected to return. The highest profile was Coinbase’s announcement in August that it had reached an agreement to let customers of BlackRock, the world’s largest investment firm, trade crypto via its exchange.

Read more: Coinbase to Give BlackRock Clients Access to Crypto

And broadly, more banks are beginning to look at or introduce retail crypto trading via their own apps, making it easier — or at least more comfortable — for U.S. consumers to invest.

“While it is a bit surprising that individual adoption in the U.S. would be flat, I can say that’s not the trend we are seeing in other markets,” blockchain data firm Chainalysis’ director of research, Kim Grauer, told the Washington Post in August. “In our recent research, we’re continuing to see increased grassroots adoption globally, and especially in emerging markets.”

Grauer added that as more traditional banks and financial institutions begin to roll out the crypto products they’ve announced, he expects “to see a new wave of new entrants into the space.”

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