CoinGecko reviews financial turmoil in the second quarter: overall market prices rise while trading volume shrinks, investors becoming more conservative

Not limited to the cryptocurrency market, including the global economy as a whole, the second quarter of 2020 was turbulent with the ripple effects of the novel coronavirus. Despite the volatility, the cryptocurrency market, with its relatively low market value and fragile nature, managed to survive. Alongside the third Bitcoin halving effect, the total market value showed astonishing growth. The cryptocurrency data platform Coingecko released a report on the second quarter, summarizing several important phenomena.

Spot Market Overview

In the second quarter of this year, the total market value of cryptocurrencies experienced astonishing growth, with an increase of 44.5% as of June 20, but the trading volume decreased by 55%. Coingecko pointed out that market value and spot trading volume are usually positively correlated, but this trend was not seen in the second quarter, possibly due to the following reasons:

• Sharp decline in confidence due to the March crash
• Investors shifting towards long-term holding ("HODL")
• Market focus shifting to DeFi sector and derivative trading

Performance of the Top Five Cryptocurrencies

The average return of the top five cryptocurrencies in the second quarter was 22%, making it a successful quarter for leading gainers Bitcoin and Ethereum, with Ethereum outperforming Bitcoin with a 69.3% increase compared to Bitcoin's 42.5%.

Ripple, Bitcoin Cash (BCH), and Bitcoin SV (BSV) prices remained relatively unchanged compared to the beginning of the quarter.

Bitcoin Price from Trading Volume Perspective

Starting from the low point of the March crash, Bitcoin saw a staggering 78% increase in the second quarter, but it took 48 days to recover from the crash and maintained a stable price after May.

Despite this, Bitcoin has not surpassed its 2020 annual high of $10,328.9, and its average trading volume decreased by about 20% compared to the first quarter.

Third Halving of Block Rewards in History

• 11% increase in 50 days before halving (2016)
• 9% decrease in 50 days after halving (2016)
• 50% increase in 50 days before halving (2020)
• 5% increase in 50 days after halving (2020)

The report compares the halving in 2016 with this year. Despite the market size being fifteen times larger than before, Bitcoin has shown even greater upward momentum than in the past.

Coingecko also noted that the Bitcoin mining industry has become completely industrialized, with mining equipment continuously upgrading, hash rate increasing, and now basic requirements to enter the mining industry include factors such as cheap power sources, logistics operations, and mine scale, as well as the need for continuous overall optimization to participate in the mining competition.

Although Bitcoin's hash rate plummeted by 27% after the third halving, it eventually recovered before the end of the second quarter.

Trading Volume of the Top Five Stablecoins

• USDT market value increased by $3.38 billion (54%)
• USDC market value increased by $293 million (42%)

The market value of the top five stablecoins increased by $3.65 billion (48%) in the second quarter, reaching a total market value of $11.2 billion, with USDT and USDC experiencing the most significant growth.

Although the total supply of stablecoins surged, the trading volume did not follow suit. The report suggests that this could be due to investors using stablecoins as a hedge or participating in non-trading activities, such as token staking, DeFi, and other areas.

Bitcoin Price from Stablecoin Turnover Perspective

• Turnover Rate Formula: Trading Volume / Market Value x 100%
• Investor behavior shifting towards "HODL"

By mid-May, the turnover rates of the top five stablecoins remained stable, indicating that users tended to seek short-term trading and arbitrage opportunities whenever Bitcoin rose. However, after May, as the price of Bitcoin stabilized, the turnover rates of stablecoins plummeted rapidly. Coingecko believes this is because investors are gradually shifting from trading arbitrage to long-term holding ("HODL").

Bitcoin Price from USDT Circulation Perspective

• USDT total supply doubled in the first quarter
• Highly positive correlation between USDT issuance and Bitcoin

In the second quarter, the total supply of USDT reached nearly $1.2 billion. Coingecko believes this is highly positively correlated with the price of Bitcoin, as USDT is the most popular trading pair in both spot and derivative markets. Additionally, its issuance continued to grow amidst a decline in spot market trading volume, which may be heavily influenced by increased trade activities between Russia and China.