Declining Trading Volume Will Weaken Incentives for Holding Crypto Stocks

DeFi researcher Ignas points out that the narratives of stocks and meme coins rely on trading volume and transaction fees. A depletion of trading volume will lead to the disappearance of rewards and buybacks, thereby weakening the incentives to hold coins and ultimately triggering sell-offs. Ignas cites examples such as STONK, PONS, and CASHCAT, which utilize platform fees for token buybacks or burns; INDEX, which purchases tokenized stocks through transaction fees; ZCAT, which funds ZEC rewards through trading taxes; and SHROOM, which reinvests the fees generated by the LP network into liquidity. Taking Coinbase as an example, its quarterly trading volume dropped from $547 billion in Q4 2021 to $145 billion a year later, a decrease of about 74%. The decline in meme coin trading volume may be even more pronounced after the hype fades, making it likely that projections of these projects' annual revenues or yields based on current high trading volumes and fee levels may overestimate their sustainability.

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