According to Mizuho analyst Dan Dolev, we’re currently seeing a strategy decoupling between Bitcoin’s price and Coinbase volumes. Dolev is questioning the viability of Coinbase’s 145% rally this year. Historically, Bitcoin’s price and Coinbase volume have had a very strong relationship. Almost 95% of retain accounting is for trading revenue, a reality check might follow soon.
In Q4 2021, Dolev pointed out that COIN volumes and the average Bitcoin price were at $550B and $55K respectively. In Q4 2022, Bitcoin dropped to a new low of $18K. However, it almost doubled that price by mid-2023. On the other hand, COIN volumes kept dropping.
Potential Investor Fatigue?
According to Dolev and other experts, this could be a potential sign of investor fatigue. Unlike in the past, FOMO is no longer the reason for investors to trade Bitcoin when prices are on the rise. Early on Tuesday, COIN gained almost 3% while Bitcoin rebounded from Monday’s sell-offs. At the moment, the price has swayed back in the mid-$25,000s, after a late Tuesday rally that saw Bitcoin jump over $26,000.
There’s a major reason for the market slump on Monday. Everyone’s afraid that FTX will unload some of its leftover $3.5 billion crypto assets, which could spur a major selloff. At least that’s what investors think. Analysts say that these fears are overblown. The selling pressure is much smaller than previously thought.
FTX could seek to unload its remaining assets at a court hearing scheduled for next Wednesday. However, according to experts, things aren’t that black and white. FTX’s crypto stash venture investments have lockups that prevent selling the assets. If the assets are approved to be sold, there would be limitations on the sales that’ll cushion the impact such a sell-off could have on the market.
What happens more likely is that the chatter dies down next week, and we’re heading toward a calm market. There’s no indicator about a bull run happening anytime soon, so we should wait and see what winter brings. After the initial scare, the market has rebounded nicely, with Bitcoin heading back close to pre-Monday’s $26,000 levels.
More Selling Pressure Soon
The calm crypto market with no new developments is probably going to last for a while. Analysts say there’s more selling pressure soon. Other events than the FTX crypto sales may put downward pressure on the crypto market prices. Pressure could come from Mt. Gox’s trustees and the American Silk Road Bitcoins.
The US authorities are slowly selling out the 50,000 BTC claimed from crypto marketplace Silk Road last year. The Mt. Gox hack where 850,000 BTC were stolen years ago has not seen a lot of action, with only a tiny part recovered. Victims might be able to reclaim their assets last year, although the schedule and structure of these sell-offs are unknown.
Of course, these are decisive forces in the formation of crypto market prices, and will certainly have some kind of an impact. We hope it’s not a negative one as the prices don’t need further drops.