Retail investors are returning to cryptocurrencies while VC funding is growing for the first time in a year and a half.
The price of Bitcoin rose nearly 70% in the fourth quarter of 2023 and the cryptocurrency market rebounded, signaling the re-entry of small retail investors. But individual investors, who lost billions of dollars in the 2022 market crash, are entering the 2021 bull market more slowly and cautiously this time around, according to a Bloomberg report.
Venture capital funding for cryptocurrency and blockchain startups also recorded a 2.5% increase in the fourth quarter of 2023, after six quarters of sustained decline, according to a Pitchbook report.
Retail traders want to participate in bull markets.
According to a Bloomberg report, cryptocurrency exchange Coinbase saw net customer trading revenue increase 60% in the fourth quarter of 2023 compared to a year ago. Compared to the third quarter of 2023, net revenue increased by 80%.
This is because Coinbase’s retail trading volume has increased. 164% The fourth quarter of 2023 compared to the previous quarter. Individual trading volume growth outpaced institutional volume growth, increasing 92% in the fourth quarter.
Retail trading on Coinbase also accounted for a larger share of overall trading volume. It was 19% in the fourth quarter compared to 14% in the third quarter. However, it is still well below the 28-40% range recorded in previous bull markets.
Robinhood Markets also reported a similar trend, with cryptocurrency nominal trading volume increasing 242% in December compared to a year ago.
Retail investors are returning to the market as the price of Bitcoin surpasses $50,000 for the first time in two years and the Bitcoin halving is imminent. Historically, Bitcoin halvings lead to “more retail engagement and growth” when mining rewards are halved, Coinbase CFO Alesia Haas told Bloomberg.
Alyssa Choo, cryptocurrency stock expert at BitInvest, said: post At X:
“As cryptocurrency market capitalization and trading volume increase, so does retail trading. “Everyone wants to be part of the bull market.”
According to Wall Street analysts, Google searches for the term ‘Bitcoin’, which indicates retail interest, increased in January following the launch of a Bitcoin exchange-traded fund (ETF) in the United States. However, Google Trends shows that search volume is back on the decline. -Market level. This indicates that individual investors are not jumping into the market first.
Kyle Doane, a trader at institutional asset management firm Arca, told Bloomberg:
“There are signs that retail customers are starting to return to the market, but we are nowhere near the levels of the last bull market yet.”
Things are starting to look better for cryptocurrency startups.
Cryptocurrency and blockchain startups generated $1.9 billion across 326 transactions in the fourth quarter of 2023, marking the first growth in cryptocurrency funding in a year and a half. Despite only a “small percentage” increase, this could mean it may become easier for startups to raise funding in coming quarters, the Pitchbook report said.
Venture capital in the cryptocurrency space has declined significantly over the past year and a half due to negative news surrounding large cryptocurrency exchanges such as Binance and FTX and the bear market. A series of bankruptcies, including FTX and Binance’s historic $4.3 billion plea deal, have rocked the markets.
However, investors remain “optimistic” about centralized exchanges because they still offer the lowest barriers to entry and a better user experience, the Pitchbook report noted.
Although the amount invested in startups increased, transaction amount decreased by 2.4% compared to the last quarter.
Cross-chain bridging protocol Wormhole closed its biggest deal in the fourth quarter, securing $225 million in an early-stage round from Coinbase Ventures, Jump Trading, and ParaFi Capital.