Crypto Trading Volume and Public Interest Decline as AI Gains Momentum

The cryptocurrency market has been navigating a phase of stagnation, with Bitcoin and other digital currencies showing minimal movement in recent months. As of Tuesday, trading volumes on centralized exchanges have plummeted to approximately $30 billion per day, a notable decline from the peaks seen in 2021, according to data from CoinMarketCap.

Bitcoin, representing the majority of trading activity, has remained within a tight range of $25,000 to $30,000 since mid-March. Tal Cohen, the U.S. managing director of crypto exchange Kraken, noted, “When prices are not moving, a lot of people lose interest.” This lack of volatility has caused many traders to explore other investment avenues.

The decline in trading activity has also impacted market makers such as Jane Street and Jump Capital, which have reportedly scaled back their operations in the United States. Similarly, GSR Markets, a major player in crypto market making, has reduced its U.S. presence in favor of foreign exchanges.

The drop in trading volumes could lead to increased price discrepancies for investors, as Evgeny Gaevoy, CEO of market maker Wintermute, pointed out that large buy or sell orders may significantly impact prices due to diminished depth in exchanges’ order books.

In a broader context, venture capital funding for crypto companies saw a dramatic 71% decrease, falling to $2.3 billion from Q2 2022 to Q2 2023. This contrasts sharply with AI and machine learning startups, which garnered $19.4 billion during the same period.

Looking at specific companies, Coinbase experienced a 37% decline in trading volume between the first and second quarters. Similarly, Robinhood reported a 58% drop in crypto trading volume in August compared to the year prior.

Despite these setbacks, there are potential triggers on the horizon that could revitalize the crypto market. One such catalyst is the possible approval of a spot-based Bitcoin exchange-traded fund (ETF). Additionally, Bitcoin’s upcoming “halving event” next April could drive demand and elevate prices. However, obstacles like regulatory challenges and ongoing legal issues within the industry remain significant hurdles.

This analysis coincides with a broader trend where interest is shifting from cryptocurrencies to AI technologies, with major firms leading this transition. Nevertheless, many in the crypto sector maintain optimism about the future, with Doug Schwenk, CEO of Digital Asset Research, asserting, “The market needs the retail side of crypto to come back.”