Crypto markets are entering a phase where activity concentration matters more than narrative momentum, according to a new outlook from Coinbase Institutional that frames 2026 as a test of whether crypto’s core markets can scale under more disciplined conditions.

The report, written by global head of research David Duong and research associate Colin Basco, argues that familiar crypto cycle models — built around retail speculation, token launches and protocol-specific catalysts — are becoming less reliable as institutional participation and market plumbing play a larger role in shaping price behavior.

Perpetual futures increasingly anchor price discovery

Coinbase identifies perpetual futures as a central pillar of crypto market activity, noting that derivatives now account for the majority of trading volume across major venues. According to the firm, this has shifted the mechanics of price formation toward positioning, funding rates, and liquidity conditions, rather than relying solely on retail-driven momentum.

The report states that leverage was sharply reduced following liquidation events in late 2025, particularly in derivatives markets. Coinbase characterizes that drawdown as a structural reset rather than a retreat, arguing that speculative excess was removed while participation in perpetual futures remained resilient. Duong and Basco write that tighter margin practices and improved risk controls are contributing to markets that absorb shocks more efficiently, even as derivatives continue to dominate liquidity.

Prediction markets move toward sustained relevance

From derivatives, the report turns to prediction markets, which Coinbase describes as evolving from experimental products into more durable financial infrastructure. The firm points to rising notional volumes and deeper liquidity as signs that these markets are increasingly being used for information discovery and risk transfer.

Coinbase also notes that fragmentation across prediction platforms is driving demand for aggregation and improved efficiency. According to the report, this dynamic is attracting more sophisticated participants and expanding usage beyond crypto-native traders, particularly as regulatory clarity improves in certain jurisdictions.

Stablecoins and payments underpin real-world activity

The final area Coinbase highlights centers on stablecoins and payments, which the firm describes as crypto’s most persistent source of real-world usage. Duong and Basco write that stablecoin transaction volumes continue to grow through settlement, cross-border transfers and liquidity management, rather than speculative trading.

Coinbase states that payment activity is becoming increasingly intertwined with other parts of the ecosystem, including automated trading strategies and emerging AI-driven applications. Rather than viewing artificial intelligence as competitive pressure, the firm argues these developments reinforce blockchain-based payments as foundational infrastructure within digital markets.

Coinbase says 2026 will test whether these markets can continue to scale and manage risk under tighter conditions, a result the firm believes will shape the future of crypto long after the next price cycle fades.