Retail trading activity in the cryptocurrency market has plummeted to levels not seen since early 2024, with capital rotating aggressively into traditional equities. Data from CryptoQuant reveals that Bitcoin spot trading volumes in February 2026 are on pace to be the lowest since the start of 2024, marking a severe contraction in market participation.
The scale of the slowdown is stark. Since Bitcoin's all-time high of $126,000 in October 2025, monthly spot volumes have been roughly halved across major exchanges. Binance's volume fell from $198 billion to approximately $75 billion, Gate.io dropped from $53 billion to $25 billion, and Bybit declined from $41 billion to $20 billion. This is not an isolated issue but a market-wide pullback, directly reflecting a "structurally cautious market phase" where participants prioritize capital preservation.
Analysts link this disengagement to a dramatic reset in speculative leverage and a shift in retail risk appetite. Estimated Leverage Ratios (ELR) have plummeted 28%, from 0.1980 to 0.1414, effectively wiping out the speculative froth that fueled the 2025 rally. Concurrently, retail traders are funneling record amounts into stocks. In January 2026 alone, retail net inflows into cash equities and options hit a record $650 million.
The rationale for the shift is clear. After Bitcoin's 46% correction from its peak, the volatility trade-off has changed. The BTC-to-Nasdaq volatility ratio has dropped below 2x, making stocks appear to offer comparable volatility with smaller drawdowns—a more rational choice for burned traders. Meanwhile, the speculative energy has rotated to AI-driven equity names, leaving crypto looking "opaque and momentum-starved."
Amid this broad liquidity drain, a minor positive signal has emerged. The Coinbase Premium Index has moved back into positive territory, suggesting selling pressure from U.S. investors on the Coinbase exchange may be easing. However, analysts caution that without a broader return of robust spot volume support, the market lacks the depth needed for a durable bullish recovery. The current outlook suggests range-bound, sideways action through mid-2026 as retail capital remains sidelined.
