Crypto markets are entering a phase where the concentration of activity is becoming more significant than the momentum of narratives, according to a recent outlook from Coinbase Institutional, which positions 2026 as a critical test for the scalability of core crypto markets under stricter conditions.
The report, authored by global head of research David Duong and research associate Colin Basco, asserts that traditional crypto cycle models—which have depended on retail speculation, token launches, and protocol-specific events—are less reliable as institutional involvement and market mechanics play a more defining role in price fluctuations.
Perpetual futures are pivotal to price discovery
Coinbase highlights perpetual futures as a fundamental component of crypto market activity, indicating that derivative instruments now contribute to the majority of trading volume across leading exchanges. The firm notes that this alteration has redirected the dynamics of price formation towards positioning, funding rates, and liquidity conditions, moving away from a reliance solely on retail-driven momentum.
The report mentions that leverage significantly diminished after liquidation episodes in late 2025, particularly within derivatives markets. Coinbase classifies this downturn as a structural reset rather than a withdrawal, positing that speculative excess was curbed while participation in perpetual futures remained robust. Duong and Basco emphasize that tighter margin practices and enhanced risk controls are fostering markets that can recover from shocks more effectively, even as derivatives maintain a predominant role in liquidity.
Prediction markets are gaining lasting importance
The report shifts focus to prediction markets, which Coinbase depicts as transitioning from experimental tools to more stable financial infrastructures. The firm highlights increasing notional volumes and deeper liquidity as indicators that these markets are progressively being utilized for information discovery and risk management.
Additionally, Coinbase observes that fragmentation across prediction platforms is heightening demand for aggregation and greater efficiency. This trend, according to the report, is drawing in more sophisticated participants and broadening usage beyond crypto-native traders, especially as regulatory clarity improves in various regions.
Stablecoins and payments drive real-world use
The final focus of Coinbase’s analysis centers on stablecoins and payment mechanisms, which the firm identifies as the most enduring source of crypto’s real-world applications. Duong and Basco note that transaction volumes for stablecoins continue to rise through settlement, cross-border transactions, and liquidity management, rather than speculative trading.
Coinbase asserts that payment activities are becoming increasingly interconnected with other aspects of the ecosystem, such as automated trading strategies and emerging AI-driven applications. Rather than viewing artificial intelligence as a competitive threat, the firm contends that these advancements reinforce blockchain-based payments as essential infrastructure within digital markets.
According to Coinbase, 2026 will serve as a litmus test for whether these markets can sustain scaling and risk management under stricter conditions, a factor the firm believes will influence the future of cryptocurrency long after the forthcoming price cycle has concluded.
