Analyst: Market Downturn Causes Sharp Contraction in CEX Trading Volume, Bear Market Cycle May Have Completed 25%

February 2nd Bitcoin has dropped more than 35% since hitting an all-time high in October 2023 and then plummeting—but exchanges like Coinbase Global Inc., Gemini Space Station Inc., and Bullish have taken an even harder hit. Trading volume, their business’s core driver, is shrinking fast, pushing their stock prices down 40% to 55% in the past three months and leaving analysts to slash their forecasts sharply. Most crypto exchanges get most of their revenue from trading fees, so revenue falls when trading dries up. Clear Street analyst Owen Lau estimates Coinbase’s Q4 trading volume fell 40% year-over-year (YoY) to $264 billion. He noted January trading activity kept sliding, with the quarter’s year-to-date annualized volume now under half of last year’s same-period level. Citigroup digital asset equities research head Peter Christiansen said more people trade during price rallies out of FOMO (fear of missing out). But when faced with headwinds, momentum is hard to build. Crypto stocks have also been hit lately as investors pull out of risk assets in the broader market—driven by worries over rising AI costs, growing geopolitical uncertainty, and a shift away from tech stocks. Bitcoin dropped nearly 11% in January, marking its fourth straight monthly decline and longest losing streak since 2018 (after the 2017 ICO frenzy collapse). Analysts say the crypto downturn could delay Gemini’s path to profitability. Needham & Co. analyst John Todaro noted the firm had targeted near-breakeven by 2027 but now likely won’t hit that until around 2028. Bullish’s January trading volume, meanwhile, may have fallen ~28% YoY. Kaiko research analyst Laurens Fraussen said: “I think we’re about 25% through the current cycle. We’ve been in this downturn for roughly three months since the peak, so I expect a meaningful recovery to take another 6-9 months.”