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Day Traders Still Reluctant to Return to Crypto Despite Recent Market Rally

Despite recent surges in Bitcoin, whose value more than doubled following a significant downturn, many day traders state that these gains are insufficient to lure them back into the market. As FTX cofounder Sam Bankman-Fried awaits his sentence after a fraud conviction, the industry anticipates this event will signal the end of its tumultuous phase and usher in a more stable era of mainstream acceptance. However, this maturity might mean the crypto market will no longer offer the extraordinary growth and unique trading opportunities seen in previous years.

Retail investors retreated from the market following FTX’s collapse last year, causing Bitcoin’s value to plummet below $16,000, resulting in a 40% decline in traders’ returns. Last week, Bitcoin surged above $35,000, though still far from its all-time high of nearly $69,000 in 2021. This spike was fueled by optimism surrounding the potential approval of the first Bitcoin exchange-traded fund (ETF), with BlackRock Inc. submitting an application in June.

The situation now appears more promising, even as the broader market has experienced a 5% decline in the S&P 500 since the end of July. Retail crypto trading volumes as a percentage of total volume in the United States on the Bitstamp exchange have increased from 33% to 35% between the first and second halves of the year. Globally, this figure has risen from 8% to 9%.

Many crypto day traders have, however, already moved on. Craig Murray, who made almost $200,000 in the market, decided to exit after hearing about FTX’s impending collapse, citing the uncertainty surrounding the crypto space as a key factor.

There is also a significant shift in trading volumes between weekdays and weekends, according to Velo Data founder and CEO Fredrick Collins. Weekday trading volumes now exceed weekend volumes by 50%, contrasting with the past when the ratio was nearly one to one.

Tim van den Berg, who traded various digital assets between 2016 and 2019, acknowledges that he initially lost around $12,000 but now trades futures profitably. However, his interest in cryptocurrencies has waned due to perceived manipulation and the market’s transformation into a playground for the wealthy.

Peter To shares a similar sentiment, reminiscing about the early days when he capitalized on late-night market fluctuations. He points out that the crypto market has evolved into a more directional and less erratic landscape.

While Murray no longer actively trades crypto, he maintains holdings on exchanges and occasionally mentors newcomers. Nevertheless, he cautions against the misconception that crypto guarantees easy riches and urges people not to take unnecessary risks.

The reduction in the number of day traders focusing on cryptos is unlikely to affect the operations of many companies in this space, such as Canaan Inc. (NASDAQ: CAN), since these don’t directly depend on trading activity.

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