Crypto markets are sliding again, but this time the pain is being felt most by the companies that run the trading platforms. As retail investors step back, major crypto exchanges are seeing volumes dry up and their share prices tumble.
Bitcoin had dropped as low as $74,876 but later recovered some of the losses. The coin has fallen about 12% over the last seven days, eroding over $200 billion in market value, CoinMarketCap data shows.
While the digital token has fallen more than 35% since its October crash from record highs, the damage to exchanges has been far more serious. Shares of companies such as Coinbase, Gemini, and Bullish have dropped between 40% and 55% over the past three months, as falling volumes weigh on earnings expectations, Bloomberg reported.
For crypto exchanges, the problem is simple. Most of their income comes from transaction fees. When fewer people trade, revenues fall sharply. According to Bloomberg estimates, Coinbase’s trading volumes in the latest quarter may have dropped 40% from a year earlier to $264 billion, with activity in January weakening even further.
What is causing this steep fall in trading?
Unlike previous crypto crashes driven by scandals or regulatory shocks, this downturn is marked by quite disengagement. Instead of panic selling, investors are simply staying away, a trend that could keep pressure on exchanges for months to come.
The slowdown is also making crypto exchange stocks particularly vulnerable compared to the broader market. Even relatively modest declines in cryptocurrency prices can translate into outsized revenue losses, as fewer traders mean fewer fees and weaker profit outlooks, Bloomberg reported.
Analysts say this pattern is typical of crypto cycles, where trading activity dries up quickly once enthusiasm fades. “When prices are rising, more people trade because they’re afraid of missing out,” said Peter Christiansen, director of digital assets equity research at Citigroup. But “if you get headwinds to that, it is hard to build momentum,” he said.
Broader market conditions are adding to the pressure. Investors have been pulling back from riskier assets across equity markets, amid concerns about the impact of rising artificial intelligence costs, higher geopolitical uncertainty and a general shift away from technology.
Bitcoin’s recent decline
Bitcoin has dropped over 10% in January alone, marking its fourth straight monthly decline, which is considered to be the longest losing streak since 2018, during the crash that followed the 2017 boom in initial coin offerings.
As per Bloombergthe reason behind this slump is the broader market unrest, with gold continuing to fall on Monday after suffering its biggest drop in more than a decade at the end of last week.
Meanwhile, Bitcoin edged higher on Monday after the token fell below $80,000. The crypto was trading at $77,925.99 at 8:37 AM ET, up about 1%, according to data from CoinMetrics.
