Institutional Momentum and Political Euphoria: How a Trump Win Ignited Coinbase’s 2-Year Trading Rally

In a remarkable twist to the cryptocurrency saga, recent post-election market dynamics have propelled Coinbase trading volumes to levels not seen in two years. According to research by Kaiko, Coinbase experienced a surge in trading activity during the fourth quarter of 2024—a period that coincided with the fervor following pro-crypto US President Donald Trump’s November election win. This momentum not only reflects a renewed investor appetite but also positions Coinbase ahead of its earnings report scheduled for February 13.

Institutional investors drove much of this recent activity. While the enthusiasm from Trump’s win ignited trading across the board, the spike in activity has come mostly from institutional players, as retail investors have remained relatively cautious. Data shows that retail trading now makes up a shrinking fraction of Coinbase’s volume—just 18%, compared to 40% in 2021. This shift hints at a market increasingly reliant on the large-scale maneuvers of institutions, leaving traditional retail investors on the sidelines despite their reputation as the highest fee payers.

The rally in trading volumes has translated into tangible market performance. Since Trump’s November win, Coinbase’s shares have appreciated by roughly 40%, according to Google Finance data. This surge has provided a bullish outlook for the forthcoming earnings report, even as Coinbase continues to contend with regulatory pressures. In the complex dance of market sentiment, while the rally underscores renewed belief in crypto as a viable asset class, it also underscores the vulnerability of Coinbase’s revenue model. Despite diversifying into subscription and services revenue streams, trading still accounts for over 50% of its overall income—a reality that ties the company’s fortunes firmly to the undulating tide of crypto market activity.

The narrative of post-election euphoria is further accentuated by broader market trends. The winner-take-all effect of political endorsements for crypto played out vividly on November 5, when Galaxy Digital reported the largest trading day of the year, sparked by these positive political developments. For Coinbase, which openly supported Trump during the electoral campaign, the timing could not be more advantageous. The incoming administration, which promises a friendlier stance toward the crypto industry, may well alleviate some of the regulatory challenges that have long troubled the exchange, particularly in its staking business—the second-largest in ETH after Lido.

Beyond the immediate earnings beat, these developments signal a potential realignment in market sentiment. With the U.S. government possibly adopting a more favorable regulatory posture under Trump’s leadership, investors may see a more predictable regulatory landscape that could bolster long-term industry stability. That said, the subdued participation from retail investors raises questions about whether this new wave of institutional trading will translate into sustainable growth, or if it is merely a temporary surge driven by political and speculative fervor.

For investors, the current climate offers both opportunity and caution. The spike in trading volumes and the attendant share price surge in Coinbase illustrate an optimism that could translate into robust earnings, provided market conditions remain favorable. Yet, the reliance on trading revenue and the absence of a significant retail presence underline a lingering vulnerability: should market activity cool or regulatory regimes shift unexpectedly, the gains might be short-lived.

As crypto laws and regulations continue to evolve worldwide, the story of Coinbase this quarter serves as both a barometer for market sentiment and a harbinger of potential future movements in the industry. Investors and market watchers alike would do well to consider whether this post-election euphoria marks the emergence of a more mature, institution-dominated market or a transient rally driven by political currents. The unfolding narrative promises to keep the crypto community—and its skeptics—on their toes in the coming months.