Cryptocurrency spot trading experienced a notable slowdown in April, marking the first decline in seven months. This change was largely attributed to diminishing expectations for interest rate cuts and reduced inflows into U.S.-listed spot Bitcoin exchange-traded funds (ETFs), according to a report by Seeking Alpha on May 18, citing data from researcher CCData.

Significant Drop in Trading Volumes

The data revealed a substantial drop in trading volumes. Spot market volume on major exchanges like Coinbase, Binance, and Kraken fell by 32.6%, reaching $2.01 trillion. Additionally, monthly derivatives trading volume decreased by 24.1% to $4.57 trillion, its first decline in three months.

CCData highlighted several key factors contributing to this downturn. Unexpected macroeconomic data, escalating geopolitical tensions in the Middle East, and negative net flows from U.S. spot Bitcoin ETFs played significant roles. These elements led to major cryptocurrencies losing the gains they had made in March.

Bitcoin’s Price Drop

April also saw Bitcoin’s price drop by almost 15%, falling below $60,000. This ended a seven-month streak of growth that had seen Bitcoin reach a record high of over $73,000 in March. The previous surge in Bitcoin’s price was primarily driven by speculation around the regulatory approval of spot ETFs and anticipation of the Bitcoin halving event.

Despite the slowdown in April, the broader trend in the crypto market suggests increasing involvement from institutional investors. Crypto custody firm Bakkt reported that the Securities and Exchange Commission’s (SEC) approval of Bitcoin ETFs would likely encourage more institutional participation in cryptocurrency trading.

Bakkt’s earnings report for the first quarter showed a 324% increase in crypto trading volume compared to the previous quarter, driven by strong client trading activity. Bakkt’s President and CEO, Andy Main, highlighted the growing demand and improved market environment, with higher coin prices and increased retail trading volume.

The Need for Institutional Trading Platforms

The rise of institutional investors in the crypto market is creating a demand for trading platforms tailored to their needs. Bakkt’s presentation noted that the current crypto trading infrastructure, designed primarily for retail investors, does not meet the large-scale needs of institutional investors who are now offering Bitcoin ETFs.

“The crypto trading industry has been built primarily for everyday retail investors who use a central limit order book trading structure,” Main said. “Meanwhile, institutional investors who are offering Bitcoin ETFs are increasingly finding that the retail central limit order book structure is not meeting their large-scale needs.”

April’s slowdown in cryptocurrency spot trading underscores the impact of broader economic and geopolitical factors on the market. While retail trading has driven much of the crypto market’s growth, the future likely holds increased participation from institutional investors, necessitating the development of more sophisticated trading platforms. As the market evolves, both retail and institutional participants will play crucial roles in shaping the landscape of cryptocurrency trading.