Coinbase's Market Analysis: Signs of a Budding Crypto Bull Market

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On 17 November 2023, David Duong, Head of Institutional Research, and David Han, Institutional Research Analyst at Coinbase, released their latest weekly crypto market commentary, offering insights into the current state and future prospects of the cryptocurrency market.

On 17 November 2023, David Duong and David Han from Coinbase provided their latest insights into the cryptocurrency market, presenting a detailed analysis of current trends and future prospects.

Market View and Economic Indicators

  • Coinbase’s analysis of the recent US CPI data, which showed a 3.2% YoY headline and 4.1% core, suggests that the macroeconomic backdrop is aligning for a potential rally in risk assets towards the year’s end. They have been firm in their belief that the US dollar strength has peaked, anticipating a softer trend into the next year.
  • According to Coinbase, the diminishing fiscal support for the US economy is likely to curb activity enough to prevent further Federal Reserve rate hikes, despite the Fed’s “higher for longer” stance.

Crypto Market Trends

  • Coinbase notes that November and December have historically been weaker months for crypto. However, they believe that the current macro environment, combined with narratives around spot bitcoin ETFs and the upcoming Bitcoin halving, could foster market resilience.
  • They report that average BTC and ETH spot volumes have surged to $8.9B per day in November, marking the highest since March 2023. Similarly, futures volumes have also seen a significant increase.

Institutional Interest in Bitcoin

  • Coinbase’s analysis indicates a notable increase in institutional demand for bitcoin. They highlight a 44% increase in open interest on traditional CME futures over the last four weeks, outpacing changes in open interest on non-CME term futures and perps.

Onchain Developer Activity

  • Addressing the challenges in measuring developer activity in the crypto space, Coinbase proposes evaluating the proportion of blockspace demand spent deploying new contracts. They use Ethereum as a baseline for this measurement, with around 1.5% of blockspace demand.

Coinbase Exchange & Coinbase Execution Services (CES) Insights

  • Reflecting on the increasing volumes across a wide range of assets on the exchange, Coinbase raises the question of whether this signals the start of a bull market. They note new money entering the space from various client segments, including ultra-high net worth individuals and traditional finance investment firms.
  • Coinbase observes that clients are diversifying beyond major cryptocurrencies into higher beta sectors, a trend reminiscent of past bull markets. They also mention that the macro environment, previously a headwind, is now seen as a tailwind, especially with the growing certainty that peak interest rates have been reached in this cycle.

Featured Image via Coinbase

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