Retail Investor FOMO Wanes, Impacting Bitcoin, Coinbase Prices

Fear of missing out (FOMO) among retail investors appears to be waning, resulting in an unprecedented divergence between the Bitcoin (BTC) price and Coinbase (COIN) volumes, according to a research report published by Mizuho Securities on Tuesday. 

“Trading volumes on COIN have historically mirrored fluctuations in bitcoin’s price,” analysts led by Dan Dolev wrote.

“Both attained their peaks in 4Q21, when COIN volumes reached nearly $550 billion and the average price of bitcoin exceeded $55,000,” for example. 

Beginning in the first quarter of 2023, the report predicts “a stark divergence between COIN volumes and the price of Bitcoin.”

The exchange’s volume decreased from $145 billion to $92 billion by the end of the second quarter and is projected to reach around $80 billion by the end of the third quarter.

During the same period, the average price of Bitcoin rose to $28,500. This, according to Mizuho, suggests retail customer fatigue, and in contrast to previous cycles, FOMO no longer “encourages investors to trade bitcoin when prices rise,” as it did in the past.

“This could prove problematic for COIN, as approximately 95% of its transaction revenue comes from retail exchanges,” the note stated, adding that the stock’s year-to-date rise is unsustainable.

The investment bank has an underperform rating and a $27 price target on Coinbase stock.

At the time of publication, Coinbase’s stock was trading at $82.49. The stock has increased approximately 125% this year, while bitcoin has increased nearly 60%.