The sharp correction in the cryptocurrency market is profoundly affecting not only investors but also the sector’s largest trading platforms.
With the price of Bitcoin fallen more than 35% since its all-time high last October, the situation is even worse for cryptocurrency exchanges that operate on a revenue model based on trading volume.
Trading volumes are shrinking significantly, particularly on major platforms like Coinbase, Gemini, and Bullish. This decline has also impacted the share performance of these companies, with prices falling by 40% to 55% over the past three months. Analysts have also begun revising their revenue expectations downwards.
Most cryptocurrency exchanges generate the majority of their revenue from transaction fees. When trading activity decreases, revenues decline proportionally. Clear Street analyst Owen Lau estimates that Coinbase’s fourth-quarter trading volume may have fallen by 40% year-over-year to $264 billion. According to Lau, the weak trend in January has pulled the annualized trading volume since the beginning of the quarter down to less than half of what it was during the same period last year.
Peter Christiansen, head of digital asset equity research at Citigroup, drew attention to market psychology. Christiansen stated that investors are more involved in the market when prices are rising due to “fear of missing out” (FOMO), but it becomes extremely difficult to build momentum when the tide turns.
Crypto stocks are negatively impacted not only by sector-specific weakness but also by overall market conditions. Macroeconomic factors such as rising AI costs, increasing geopolitical uncertainty, and outflows from technology stocks are leading investors to shy away from risky assets. Bitcoin fell approximately 11% in January, marking its fourth consecutive monthly decline. This was the longest losing streak since 2018, following the crash after the ICO boom in 2017.
Analysts believe current market conditions could also delay the profitability timelines of some companies. Needham & Co. analyst John Todaro stated that Gemini initially aimed to approach its break-even point in 2027, but this timeline could likely be pushed back to 2028. Bullish’s January trading volume is also estimated to have fallen by approximately 28% year-on-year.
“Three Months Passed in the Downturn, 6-9 Months Remaining”
Laurens Fraussen, a research analyst at Kaiko, commenting on the market cycle, said that the current process may still be in its early stages. Fraussen noted that nearly three months have passed since the peak, and that approximately 25% of the cycle may be complete, suggesting that a significant recovery could require another six to nine months.
*This is not investment advice.
