Crypto’s latest downturn looks different. There are no major scandals, no bankrupt exchanges, and no big regulatory crackdown. Yet for major trading platforms, the impact is starting to feel all too familiar.
Bitcoin has fallen more than 35% since its October crash from record highs. But exchanges like Coinbase, Gemini, and Bullish have taken even bigger hits. Trading volumes—the main source of their revenue—are dropping sharply, pushing share prices down 40% to nearly 60% over the past three months and forcing analysts to lower expectations. Coinbase, Gemini, and Bullish did not respond to requests for comment.
The Revenue Pressure
The issue is simple. Most crypto exchanges earn most of their money from transaction fees. When trading slows, revenue falls. At Coinbase, fourth-quarter trading volume may have dropped 40% from a year earlier to $264 billion, according to Clear Street analyst Owen Lau. January activity was even lower, putting the quarter on track to finish at less than half of last year’s level. For investors using crypto stocks as a proxy for digital-asset growth, the message is clear: even small price drops can cause large revenue losses when traders pull back. Bitcoin falling below $80,000 this past weekend increases the chances of a wider investor exit.
Investor Behavior and Market Trends
“When prices rise, more people trade out of fear of missing out,” said Peter Christiansen, director of digital assets equity research at Citigroup. “But when headwinds appear, momentum is hard to build.” Crypto stocks are also feeling pressure from broader market trends. Investors are moving away from risk assets amid rising AI costs, higher geopolitical uncertainty, and a rotation away from tech.
Bitcoin fell nearly 11% in January, marking its fourth straight monthly decline—the longest losing streak since 2018 after the ICO boom. The slump comes during general market unrest, with gold also falling sharply after its biggest drop in over a decade. Exchange Profitability Concerns
Due to the crypto slump, Gemini’s profitability is likely delayed. Analysts now expect break-even in 2028 instead of 2027, according to John Todaro of Needham & Co. Bullish, focused on institutional clients, may see January trading volumes fall about 28% year-on-year. Shares of Bullish fell about 2%, Coinbase dropped 2.9%, and Gemini slipped almost 6%.
Laurens Fraussen, research analyst at Kaiko, estimates the market is “about 25% of the way through this cycle,” suggesting another six to nine months before notable recovery.
What Makes This Cycle Different
Unlike previous crypto downturns, this slump lacks a clear trigger. The 2018–2019 crash followed the ICO bubble and regulatory action. The 2022–2023 downturn was driven by failures like Terra-Luna, Three Arrows Capital, and FTX. This time, there’s no single shock—though traders are still recovering from October’s mass liquidations.
Retail activity remains sluggish. Progress on US crypto market-structure legislation has stalled, leaving traders in limbo. Many are content to wait on the sidelines, leading analysts to describe the current period as a bear market rather than a full crypto winter.
Despite the growth of spot Bitcoin ETFs and years of infrastructure buildout, trading activity is shrinking in a pattern similar to previous downturns, according to Kaiko. The key difference is behavioral: traders aren’t panicking—they’re simply disengaging.
Shifts in Investor Attention
Some traders are moving to decentralized exchanges for speed and leverage. Others are exploring AI tokens, prediction markets, gold, sports betting, and small-cap tech.
Major exchanges are somewhat protected by diversification into areas like digital-asset custody, prediction markets, or stock trading. But the protection is limited.
Looking Ahead
Unlike past downturns caused by internal failures, this slowdown may only end with regulatory clarity. The crypto and banking industries are set to meet at the White House to discuss a Senate market-structure bill.
Until then, crypto exchanges are learning that even without a crisis, the market can stall—and their trading fee model feels the first strain.
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