Bitcoin prices climbed nearly 70% in the fourth quarter of 2023 and the crypto market has been rebounding, marking the re-entry of small retail investors. However, retail investors, who lost billions of dollars in the 2022 market crash, are moving in more slowly and cautiously this time, compared to the bull market in 2021, according to a Bloomberg report.

Venture capital funding in crypto and blockchain startups also recorded a 2.5% increase in Q4 2023 after constantly declining for six quarters, according to a Pitchbook report.

Retail traders want to be part of the bull market

Crypto exchange Coinbase has seen its net revenue from customer transactions rise 60% during the fourth quarter of 2023 compared to a year ago, according to the Bloomberg report. Compared to Q3 2023, the net revenue increased by 80%.

This is because the retail trading volume on Coinbase was up 164% in Q4 2023 compared to the previous quarter. The growth in retail trading volume outpaced that of institutional trading volume, which grew by 92% in Q4.

Retail trading on Coinbase also made up a larger chunk of the total trading volume — 19% in Q4 compared to 14% in Q3. However, it is still well below the 28-40% range recorded during the previous bull market.

Robinhood Markets reported a similar trend, with crypto notional volumes increasing by 242% in December compared to a year ago.

Retail investors are returning to the market with Bitcoin prices crossing the $50,000 mark for the first time in two years and the impending Bitcoin halving. Historically, Bitcoin halving, when mining rewards are slashed in half, leads to “more retail engagement and growth,” Coinbase CFO Alesia Haas told Bloomberg.

Alyssa Choo, crypto equities specialist at BitInvest, noted in a post on X:

“As the crypto market cap and trading volumes go up, retail trading goes up as well. Everyone wants to be a part of the bull market.”

Google searches for the term ‘Bitcoin,’ which indicates retail interest according to Wall Street analysts, increased in January when the Bitcoin exchange-traded funds (ETFs) were launched in the U.S. However, Google Trends show that the searches have slumped back to bear-market levels, indicating that retail investors are not diving headfirst into the market.

Kyle Doane, a trader at Arca, an institutional asset management firm, told Bloomberg:

“There are signs that the retail audience is starting to get back into the market, but not nearly to the extent of the last bull market yet.”

Things are starting to look up for crypto startups

Crypto and blockchain startups bagged $1.9 billion from 326 deals in Q4 2023, marking the first growth in crypto funding in a year and a half. Despite being only a “tiny percentage” increase, the Pitchbook report said it could mean it will become easier for startups to raise funds in the coming quarters.

Negative news surrounding large crypto exchanges like Binance and FTX and the bear market saw venture capital in crypto drying off significantly over the past year and a half. A series of bankruptcies, including that of FTX, and Binance’s historic $4.3 billion plea deal shook the market.

However, centralized exchanges still offer the lowest barrier to entry and a better user experience, which is why investors are still “optimistic” about them, the Pitchbook report noted.

Although the amount invested in the startups increased, deal volume decreased by 2.4% over the past quarter.

Crosschain bridging protocol Wormhole signed the biggest deal in Q4, securing $225 million in an early-stage round from Coinbase Ventures, Jump Trading, and ParaFi Capital.

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