Crypto Market: ‘Dramatic’ Trading Drop Plagues Still Reeling Crypto Market

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The crypto market, in addition to everything else, has another problem on its hands: trading activity is in the gutter.

In 2022, trading volume on centralized exchanges such as Coinbase, Kraken, and Binance fell by more than 46%, according to data compiled by CryptoCompare. On Binance, which remains the market share leader, spot trading fell 45% to $5.4 trillion. And Bitcoin, the most traded digital asset, saw its trading volumes drop 31% year-over-year, the researcher said in a report.

Meanwhile, a Liquid Tradeable BTC proxy tracked by Arcane Research slipped to June 2020 lows, and trade balances fell 12% on increased self-custody, the company said in a statement. report compiled by Bendik Schei and Vetle Lunde. This, they say, has direct implications for Bitcoin’s liquidity, as fewer coins available for trading can mean more volatility.

We are seeing quite dramatic declines in cash activity, said Strahinja Savic, head of data and analysis at FRNT Financial.

In a vacation-shortened week to start the year, Bitcoin remained within the narrow $17,000 range either side it has mostly lingered in since late November.

Chart: Crypto Compare1

Agencies Cryptocurrencies crashed last year amid a number of big implosions for big projects like the Terra stablecoin ecosystem and the FTX empire. Bitcoin fell 64%, its second-worst annual performance in its 14-year history. The token price tumble spooked many retail investors who had flooded the market in the early years of the pandemic, when lockdowns were still in effect. Additionally, many institutional investors have been alarmed by the scandals that have left the industry reeling and likely to take a long time to recover. The lack of trading volumes is another indicator that institutions have abandoned the asset class for the time being and it could take some time before they regain confidence in the market again, according to Matt Maley, chief strategist of the market at Miller Tabak + Co.

This is especially true in a bear market, he said. Their clients are much less forgiving when they see big losses in a risky asset class during a general bear market for risky assets.

Chart: Bitcoin plunged

Fund managers who have avoided the many ups and downs of crypto may feel relieved to have done so, according to Jared Gross, head of institutional portfolio strategy at JPMorgan Asset Management. As an asset class, crypto is effectively non-existent for most large institutional investors, he said on a recent episode of the What Goes Up podcast.

The crypto industry is still reeling from the fallout from the FTX empire, and market watchers are wary of more adverse developments around other major players. Broker Genesis has laid off around 30% of its workforce in recent days, another sign of the extent to which recent events have shaken the industry.

On Friday, digital asset entrepreneur Justin Sun transferred around $100 million worth of stablecoins to his crypto exchange Huobi Global, which has been hit by a wave of withdrawals. The trades came amid high pressure on Singapore-based Huobi, which saw around $85 million in crypto outflows over a 24-hour period according to data from Coinglass. The exchange said on Friday that it plans to lay off about 20% of its workforce and will maintain a very lean team as the crypto markets crash enters its second year.

While exchanges such as Huobi are primarily retail-focused, institutional interest is more relevant to trading activity, especially at the start of the next rally, says Noelle Acheson, author of the Crypto Is Macro newsletter. Now. They typically account for the bulk of trading and have different risk profiles, she said. Retail trade tends to enter in size later in the cycle, closer to the top.

Acheson added that there are some brave and very confident retail investors entering the market right now, but we are far from seeing a wave.

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