The price of Bitcoin has experienced a significant rally in recent weeks, doubling in value since its lows in November 2022. This surge comes after the UK collapse of the cryptocurrency exchange FTX. However, former day traders who previously profited from Bitcoin’s volatile swings have no plans to return, despite growing optimism about the market.
Bitcoin’s Diminishing Volatility
“Bitcoin is not as volatile or as driven as it was,” stated Peter To, a 34-year-old professional stock trader in New York who made over $1 million day trading Bitcoin from 2013 to 2017. In an interview with Bloomberg, To explained, “For traders like me who are hunting for inefficiencies in the market, it’s not as interesting. The allure is kind of gone.”
As the cryptocurrency industry aims to recover from the FTX incident and enter a more stable period, some experts believe that the days of exponential growth and abundant trading opportunities may be over. While Bitcoin’s recent climb above $35,000 generated some optimism, it still remains considerably lower than its all-time high of nearly $69,000 in 2021.
Retail Crypto Trading in Decline
Following the collapse of FTX, retail crypto trading experienced a decline, with Bitcoin dropping below $16,000. This downturn impacted more than just the cryptocurrency industry, as day trading also decreased in equity markets. JPMorgan Chase & Co. reported a 40% plunge in the share of retail investors in US stock volumes between early 2021 and the end of 2022.
However, there are signs of a modest retail revival, even amidst stock market fluctuations. Retail crypto volume as a percentage of total US volume on the Bitstamp exchange has risen from 33% to 35% in the ongoing second half of the year. Globally, the increase has been from 8% to 9%. “The retail marketplace in a bear environment is generally quite sleepy,” noted Bitstamp USA CEO Bobby Zagotta. “I feel like we are seeing some improvement here.”
Despite these positive signs, many former crypto day traders are still hesitant to reenter the market. For instance, Craig Murray, who made almost $200,000 trading crypto before the collapse of FTX, decided that the risks outweighed the potential gains. Murray stated, “That kind of put me over the edge. I just decided it wasn’t worth it. Why would I have my money in this space when there’s a chance that one day it could just all go away?”
Another indicator that retail crypto trading has not regained its previous heights is the weekday versus weekend volume ratio. According to Fredrick Collins, CEO of crypto data firm Velo Data, “It’s not unusual nowadays to see weekday trading volume average 50% higher values than weekend trading volume, whereas in the past, this ratio was almost 1:1.”
Traders like Peter To, who seek market inefficiencies, find crypto less appealing due to its more predictable directional trends. “In the early days, you would hunt for glitches to make money,” To explained. “Now, if crypto goes up, you make money, and if it goes down, you lose. It’s more directional, which is a different game.”
While some individuals continue to hold onto their crypto assets or educate newcomers to the industry, many view it as too risky for the average person. Murray emphasized, “A lot of people go into crypto thinking it’s going to be easy money. Then they take bigger risks than they intended.”
In conclusion, as Bitcoin rallies, former day traders who once fueled its volatility have largely moved on to less chaotic markets. While the crypto industry may be maturing, the early years of extreme price swings and windfall profits may be a thing of the past.
