According to updated data from CoinDesk, as of the morning of January 8, the Bitcoin price dropped by 2.35%, plunging to $42,000. Signaling a winter of the crypto market.
Some cryptocurrency exchanges are entering a difficult period as individual investors begin to adopt the strategy of “hodl” (holding a certain coin without selling it, no matter how the price drops) and avoid trading when cryptocurrencies are depreciating.
In the past week, FTX.US – the US branch of the exchange of the same name has witnessed a decline in total trading volume. “In my opinion, it looks like we are in a of just decreased volume and subdued trading activity following drops in general.” Brett Harrison, President of FTX.US told Bloomberg.
“After prices fall, you will usually see a lot of quick volume from people trying to sell off during a panic, but then a longer period of decreased volume as people shy away from the market after the volatility,” he said.
“There needs to be ‘more confidence’ from retail investors for crypto trading volumes to come back,” emphasized Brett Harrison.
Similar to FTX, Coinbase Global, Inc., the largest US cryptocurrency exchange, also saw a drop in Bitcoin’s daily trading volume. At that point, the Bitcoin price fell from about $47,000 to a low of $40,634, with Coinbase shares closed at $232, down from as high as $357 in November.
The reason why Coinbase shares depreciated is due to the decline in trading volume on this exchange because most of Coinbase’s revenue comes from trading fees.
“Declining price could drive lower trading volume when it gets to the point to discourage traders to get engaged,” said Owen Lau, an analyst at Oppenheimer & Co. said.
“While it’s possible the first quarter may be another ‘mini crypto winter’, there appears to be an upward trend as digital assets adoption continues. Prices might also decline so much that they look cheap and entry buyers to come back in”, Mr. Lau continued.
On January 7, Mike Novogratz, CEO and founder of Galaxy Digital Holdings, told CNBC that he would wait a little longer before investing in cryptocurrencies. When Bitcoin hovered at $41,990, he declared on Twitter that it was time to buy.