Coinbase Institutional Trading Impact on Crypto Price Trends

For years Coinbase has been providing cryptocurrency trading services for institutional clients. Coinbase has disclosed that they use “Advanced algorithms designed to minimize market impact”. Specifically, they take a large client order and create thousands of smaller orders to execute on multiple cryptocurrencies exchanges. Coinbase will execute these orders periodically over an expanded time range.

This trading pattern is designed to provide Coinbase clients with the best price execution. Thus, when executing a multimillion-dollar position, it can result in a slower price movement rather than a price spike or dump. This can limit impact this has is the removal of liquidity on the other side of the Coinbase position (are you trying to point out that this will not lead to more selling or buying given the gradual change in proces). A lack a liquidity can and does often lead to higher volatility with larger price swings.

The Coinbase trading algorithm further supports Quantify Crypto's thesis that large cryptocurrency price moves are often proceeded by smaller price moves in the same direction. Furthermore, in addition to Coinbase, many other institutions often try to mask their intent by using multiple accounts and exchanges.