Bitcoin prices rose almost 70% in the fourth quarter of 2023 and the cryptocurrency market has been recovering, marking the re-entry of small retail investors. However, retail investors, who lost billions of dollars in the 2022 market crash, are acting more slowly and cautiously this time, compared to the 2021 bull market, according to Bloomberg. report.
Venture capital funding in cryptocurrency and blockchain startups also saw a 2.5% increase in Q4 2023 after declining steadily for six quarters, according to a Pitchbook. report.
Retail traders want to be part of the bull market
According to Bloomberg report, Coinbase's net customer transaction revenue increased by 60% during the fourth quarter of 2023 compared to a year ago. Compared to the third quarter of 2023, net income increased by 80%.
This is because retail trading volume on Coinbase increased. 164% in the fourth quarter of 2023 compared to the previous quarter. Retail trading volume growth outpaced institutional trading volume, which grew 92% in the fourth quarter.
Retail trading on Coinbase also accounted for a larger share of total trading volume: 19% in Q4 compared to 14% in Q3. However, it is still well below the 28-40% range recorded during the previous bull market.
Robinhood Markets reported a similar trend, with notional cryptocurrency volumes increasing 242% in December compared to a year ago.
Retail Investors Return to Market on Bitcoin Prices crossing the $50,000 mark for the first time in two years and the imminent Bitcoin halving. Historically, the Bitcoin halving, when mining rewards are cut in half, leads to "increased retail participation and growth," Coinbase CFO Alesia Haas told Bloomberg.
Alyssa Choo, crypto stock specialist at BitInvest, noted in a mail in X:
โAs cryptocurrency market capitalization and trading volumes increase, retail trading also increases. โEveryone wants to be part of the bull market.โ
Google searches for the term 'Bitcoin', which indicates retail interest according to Wall Street analysts, spiked in January as Bitcoin exchange-traded funds (ETFs) launched in the US. However, Google Trends shows that Searches have dropped again. -market levels, indicating that retail investors are not jumping headlong into the market.
Kyle Doane, a trader at Arca, an institutional asset management firm, told Bloomberg:
"There are signs that the retail public is starting to return to the market, but not yet to the extent of the last bull market."
Things are starting to look up for crypto startups
Cryptocurrency and blockchain startups raised $1.9 billion from 326 deals in Q4 2023, marking the first growth in cryptocurrency funding in a year and a half. Despite being only a โsmall percentageโ increase, the Pitchbook report says it could mean it will be easier for startups to raise funds in the coming quarters.
Negative news surrounding large cryptocurrency exchanges like Binance and FTX and the bear market caused cryptocurrency venture capital to dry up significantly over the past year and a half. A series of bankruptcies, including that of FTX, and the historic one of Binance $4.3 billion plea deal shook the market.
However, centralized exchanges still offer the lowest barrier to entry and a better user experience, which is why investors remain "optimistic" about them, the Pitchbook report noted.
Although the amount invested in startups increased, transaction volume decreased by 2.4% during the last quarter.
Cross-chain bridge protocol Wormhole signed the biggest deal in the fourth quarter, securing $225 million in a seed round from Coinbase Ventures, Jump Trading, and ParaFi Capital.
