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Cryptopolitan 2025-12-28 10:05:14

Coinbase outlines three drivers for crypto in 2026

The crypto cycl e ev eryone’s used to: hype, speculation, boom, bust, repeat, might be over. At least that’s what Coinbase Institutional is saying in their latest report. Colin Basco, an analyst, and David Duong, head of research at Coinbase Institutional, examined what is now driving the cryptocurrency markets. What did they learn? The period of the wild west is coming to an end. Retail traders and meme coin frenzy are giving way to professional trading infrastructure and institutional money. Derivatives markets run the show The key one is that trade activity on major exchanges is now dominated by perpetual futures. This fundamentally alters the way cryptocurrency prices fluctuate. In the past, it was straightforward: coins were purchased, and prices increased. Coins were sold, and prices decreased. Right now? Leverage, funding rates, and the liquidity of the derivatives market are crucial. Late 2025 saw massive liquidations that wiped out a ton of leverage in these markets. But Coinbase doesn’t see this as a bad thing. According to Duong and Basco, tighter margin requirements and better risk management are actually making markets healthier. When bad news hits, the crashes aren’t as brutal. And despite more regulation, derivatives still provide most of the liquidity traders need. Prediction markets go mainstream The second trend is that prediction markets are becoming real financial instruments rather than just places to bet on random objects. Both volume and liquidity are rapidly increasing. People use these marketplaces for knowledge gathering and risk reduction about unclear situations in addition to gaming. Right now, prediction markets are scattered across different platforms. For traders who can identify price disparities and take advantage of them, this opens up chances. There’s growing demand for tools that pull data from all these platforms in one place. Professional traders are becoming increasingly involved, and they are no longer limited to cryptocurrency enthusiasts. This is especially true in regions where regulators are starting to provide clearer rules. Stablecoins move beyond trading Stablecoins and payments make up the third category . This is the point at which cryptocurrency becomes practical rather than just speculative. Stablecoin transactions are becoming more frequent, but this isn’t because traders are flipping them. Businesses utilize them for foreign payments, treasury management, and settlements. Important yet boring stuff. What’s interesting is how payments tie into everything else happening in crypto. DeFi protocols run on stablecoins. AI applications are starting to use them too. Coinbase pushes back on the idea that AI threatens crypto payments. They argue the opposite—AI needs the kind of programmable, 24/7 financial infrastructure that blockchains provide. Make or break year The ability of these three industries to continue expanding in the face of stricter regulations and increased professional scrutiny will be put to the test in 2026. For years to come, the answer will likely dictate how cryptocurrency develops. If you're reading this, you’re already ahead. Stay there with our newsletter .

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