Bitcoin price movements are crucial to the adoption and pricing trend of Bitcoin, especially as many new traders are entering the market on random exchanges. While experienced traders may be looking for a place to park money, make trades, and identify the right exchange that facilitates such trading, their trade decisions are based on key metrics like daily trading volume.
Based on the shared trade volume chart above, Coinbase’s organic trade volume productivity has grown rapidly. The rapid institutionalization is another factor that may explain the spike in the volume chart. Since this institutionalization led to a decrease in volatility in the price of Bitcoin, retail traders are being denied the opportunity to book profits as institutional traders rely heavily on volume rather than price jumps on the Bitcoin chart.
As for Coinbase, it remains popular among retail and institutional merchants. Although the exchange enjoyed the said spike in volume, it should be noted that it came the same day it filed a secret S-1 before a likely IPO. On the same day, Coinbase also had the second highest daily volumes in existence.
The highest volume day for Coinbase was recorded on 22 December 2017 with $ 3.36 billion, while on 18 December 2020, the volume was the second highest at $ 2.92 billion. The coincidence is almost poetic.
In fact, three of the top 5 volume days on Coinbase occurred in the past month alone, based on data from this Twitter thread,
12/22/2017 $ 3.36 Billion
12/17/2020 $ 2.92 Billion
12/12/2017 $ 2.71 Billion
11/24/2020 $ 2.48 Billion
11/26/2020 $ 2.19 Billion
Besides, Coinbase’s IPO was not an overnight move as there was plenty of background preparation for the same (partly from the growing number of institutional traders and partly from high exchange volume). Coinbase has embraced organizations, so there is an opportunity for retail traders to benefit. Retail traders on Coinbase could go with the organizational flow, rather than contrarians, based on signals from organizations that are easy to read through the volume charts.
Volume is by far the most important metric to track for Coinbase as random trading fees make up the vast majority of their revenue. Although the exchange has ventured into custody and the revenue from custody is growing, it is purely transactional. There is no borrowing revenue, Futures / Options trading on the exchange.
While many would argue that Coinbase would not be able to compete with other spot exchanges as the fees are relatively high, there are key metrics and insights in its trade volume. $ 13.6 billion in trade volume on the high volume 5 days is a feat to attract more merchants and retail organizations to the exchange for its high liquidity.