Analyst: Market Downturn Causes Sharp Contraction in CEX Trading Volume, Bear Market Cycle May Have Completed 25%

BlockBeats News, February 2nd. According to Bloomberg, since plummeting from its an all-time high in October last year, the price of Bitcoin has dropped more than 35%. However, for exchanges like Coinbase Global Inc., Gemini Space Station Inc., and Bullish, the blow has been even more severe. The trading volume, as the core engine of their business, is shrinking rapidly, dragging their stock prices down by 40% to 55% over the past three months, forcing analysts to significantly lower their expectations.

Most cryptocurrency exchanges derive the majority of their revenue from trading fees. When trading activity dries up, revenue naturally declines. Clear Street analyst Owen Lau estimates that Coinbase's fourth-quarter trading volume may have dropped by 40% year-on-year to $264 billion. He pointed out that the trend of trading activity in January continued to decline, leading to an annualized trading volume for the quarter so far that is less than half of the level compared to the same period last year.

Peter Christiansen, Citigroup's head of digital asset equities research, stated that during price increases, more people engage in trading out of fear of missing out. However, if faced with a headwind, it is challenging to build momentum.

Recently, cryptocurrency stocks have also been affected by investors pulling out of risk assets in the broader stock market due to concerns about the impact of rising AI costs, increased geopolitical uncertainty, and a general rotation of funds away from the tech sector. Bitcoin fell by nearly 11% in January, marking the fourth consecutive monthly decline and setting the longest losing streak since 2018 (during the collapse following the initial coin offering frenzy in 2017).

Analysts suggest that due to the downturn in the cryptocurrency market, Gemini's profitability timeline may be forced to be delayed. Needham & Co. analyst John Todaro pointed out that while the company originally expected to approach breakeven in 2027, it is now likely to be postponed to around 2028. Meanwhile, Bullish's trading volume in January may have dropped by about 28% year-on-year.

Kaiko research analyst Laurens Fraussen stated: "In my view, considering the current stage of the cycle, we may have completed about 25%. Since the peak, we have gone through approximately three months, so I estimate that it will take another six to nine months to see a significant recovery."