Bitcoin: retail activity at a minimum? The absence from the market

Retail activity on Bitcoin has hit the lowest peak of the last 9 years.

This is what Darkfost, a writer for CryptoQuant, reveals on X.

According to Darkfost, at the moment retail investors are practically absent from the BTC market.

Retail activity

Darkfost shows in particular a CryptoQuant chart that displays over time the trend of BTC inflows to Binance from the so‑called “shrimps”.

On financial markets the term “whales” is used to indicate those entities that move large amounts of capital, while “shrimps” refers precisely to retail investors who move limited capital. In this CryptoQuant chart, shrimps are those who move less than 1 BTC. 

The chart starts in 2017, and shows that since then retail activity has never been this low. 

Darkfost points out that the 30‑day moving average of BTC inflows to Binance from retail has recently fallen to 332 BTC, which is the lowest level observed since 2017 (the year the Binance platform was launched).

However, an important clarification needs to be made in this regard. 

As of today, 332 BTC are worth more than 25 million dollars, whereas in 2017 they were worth at most 6.6 million dollars. In fact, excluding the speculative bubble at the end of 2017, before that bubble started to inflate they were worth just over 1 million dollars. 

The comparison therefore does not seem particularly significant, because what matters is the real value and not the nominal one. 

However, Darkfost also points out that in January 2024 the monthly average of BTC inflows from retail investors to Binance was around 1,000 BTC, or about three times higher than today. 

The fact is that in January 2024, 1,000 BTC were worth more than 40 million dollars, which is almost double the current 25 million. 

The reasons for the decline

According to Darkfost, the main reason for this decline is that more and more retail investors are actually keeping their BTC on exchanges, without moving them. 

In theory, however, it would be better to store them on non‑custodial wallets when they are not being used, whereas it seems that many prefer to keep them on the custodial wallets of exchanges. 

The CryptoQuant author states that there are investors who believe that their funds are safer when managed by third parties, such as exchanges, rather than through self‑custody.

A second reason behind this decline is precisely the arrival of spot BTC ETFs in January 2024, because these derivatives ended up amplifying the shift of BTC towards third‑party custodians. 

However, there may also be other reasons.

Darkfost, for example, mentions the fact that some retail investors may have recently left the crypto market to move into the stock market or commodities such as gold and silver, given that these have recently recorded decidedly significant performances.

The same author admits that the evolution of Bitcoin, from 2017 to today, has reshaped the market structure, and retail participants have probably adapted accordingly, reducing their on‑chain activity.

Retail activity on the markets

All this concerns on‑chain retail activity, that is, activity that involves the use of custodial wallets. 

If instead we analyze off‑chain activity, and in particular that on exchanges, the numbers tell a different story. 

Taking as a reference, for example, the daily BTC/USDT trading volumes on Binance, these continue to be high. 

In this case, however, it is better to ignore 2017, because in the year Binance was launched the volumes were obviously low. 

The fact is that currently the 30‑day moving average indicates an average above one billion dollars (1.3 billion) for daily trading volume, still well above, for example, the 600 million of the 2018/2019 bear market. 

However, the current average is much lower than, for example, that of May 2022 (2 billion), even though at that time there was the crypto market crash due to the implosion of Terra/Luna, which greatly increased volatility and trading. But both in April 2022 and in June of the same year the average was 1.9 billion. 

So it is absolutely true that retail activity on the Bitcoin market is declining, but not really at the lowest levels of the last nine years. 

If we then move to Coinbase, the current average (600 million dollars) is almost perfectly in line with that of 2022. 

It is therefore a cyclical phenomenon, mainly due to the bear market and to the fact that this year, so far, there have not been crashes like those in the past.