Coinbase is not profiting from Bitcoin’s big rally. Why this time is different.
Bitcoins
rally to start 2023 has spurred calls for another bull market, with the biggest cryptocurrency gaining 80% to outperform the stock market – where
S&P 500
is up a scant 7% in comparison – as a leading indicator of risk sentiment.
This time may be different.
“Investors excited about Bitcoin’s rally to $30,000 may be in for a rude awakening when they realize it didn’t boost trading volumes on Coinbase
,
,” Dan Dolev, an analyst at Mizuho Securities, wrote in a Thursday note. Coinbase’s average daily volume is less than $1 billion in April versus $1.6 billion in March, he added.
“We believe large institutional players are buying Bitcoin in the hope that retail will follow suit. Yet retail seems disinterested,” Dolev said. “This is not a broad-based crypto renaissance.”
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Mizuho rates Coinbase stock as Underperform with a $30 price target. Shares of the broker are up more than 102% this year, opening Thursday at $69.89.
However, there are other, alternative signs that there is momentum behind smaller US investors returning to crypto.
First, the recent growth in Bitcoin wallets is concentrated among the smallest holders. The number of wallets with at least 0.01 Bitcoin — about $300 — has risen more than 3% since the start of 2023, according to crypto data group Messari. Growth slows as wallets get bigger: The number of wallets containing at least one Bitcoin has grown around 1.5%, while wallets with more than 10 Bitcoin are up just 0.5%.
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There is also the so-called Coinbase Premium Gap, a metric tracked by data firm Crypto Quant that measures the difference between Bitcoin prices listed on Coinbase and those on Binance, the world’s largest crypto exchange. Since Coinbase is most popular in the US and Binance is an offshore behemoth, the gap indicates how crypto demand among Americans stacks up relative to the rest of the world.
After spending much of 2022 in discount territory, Coinbase Premium has been positive for most of 2023, hovering around $25 on Wednesday.
Coinbase publishes its financial results for the first quarter, probably in May – and where Bitcoin prices will be then, who knows? — and will hopefully provide some guidance for the current quarter, which includes Bitcoin’s latest bullish jump.
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Until then, however, there is at least reason for optimism.
Write to Jack Denton at [email protected]
