Markets
Crypto Maturity Pressures Coinbase Trading Revenue
The cryptocurrency market has taken a more mature turn, with price fluctuations becoming less erratic. This change is expected to significantly impact the revenue of large exchanges such as Coinbase Global Inc. (NASDAQ:COIN).
What happened: Despite the increase in digital asset activity, the crypto market has seen a decrease in price fluctuations, a major attraction for many investors. This change is expected to have a significant impact on the main source of revenue for major exchanges like Coinbase, Bloomberg reported on Friday.
Despite exceeding Q1 revenue and profit projections, Coinbase’s consumer trading volume was $56 billion, a significant drop from its peak of $177 billion in Q4 2021. Trading volume of Bitcoin (CRYPTO: Bitcoin), which contributes significantly to Coinbase’s trading fee revenue, has moderated since the cryptocurrency’s all-time highs in March.
Alesia HaasCFO of Coinbase, said: “Volatility looks much more mature this cycle than in 2021. Bitcoin volatility, Ethereum volatility (CRYPTO: ETH) start to come, as I call it, on the grid.”
The average volatility of digital assets has decreased to 57% this year from around 79% in 2021, according to data from CCData.
Other exchanges also predict lower volatility this year, in part due to the creation of the spot Bitcoin ETF, which has led to more orderly inflows and less chaos in the market. Furthermore, the prices of tokens, including Bitcoin, are already high, potentially limiting their ability to rise quickly.
Why does this matter: This change in market dynamics follows a period of record growth in turnover on Coinbase platforms due to the introduction of spot Bitcoin ETFs. However, the current maturity of the market may pose challenges to sustaining this growth.
Coinbase shares were trading lower recently, possibly reflecting investor concerns about changing market dynamics.
Despite the potential impact on Coinbase’s revenue, the company’s future remains bright. Its net profit is expected to increase significantly this year, and the company has already diversified its revenue sources, relying less on trading fees than in 2021.
Additionally, Coinbase’s ability to maintain its spot market share will be crucial, especially as its share fell to 4.18% in May from 6.5% in early 2023, according to CCData. The company’s prospects will also depend on the duration of the current bull market, with analysts predicting that if it continues until 2025, Coinbase could generate even more revenue.
Price Action: According to Benzinga ProCoinbase closed at $234.76 on Thursday, while BTC was trading 0.82% higher at $68,880.69 at the time of writing.
Photo by Useacoin on Shutterstock
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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