Markets
Coinbase expands revenue streams as crypto trading matures
Digital assets have had a big year as the market moves toward mainstream adoption.
This change led to a decrease in price volatility, which was a major draw for many investors, Bloomberg reported Thursday (May 30).
As a result, the largest US crypto exchange, Coinbasehas experienced a decline in consumer trading volume and a potential upheaval in its revenue streams, according to the report.
The volatility of the digital asset market has decreased significantly in recent times. According to the researcher CCDatathe average volatility of digital assets fell to 57% this year, compared to around 79% in 2021, the report said.
This decrease in volatility is seen as a sign of market maturation, as it attracts fewer speculative traders, according to the report.
Coinbase, like other exchanges, relies on trading fee revenue generated from cryptocurrency trading volume. However, the drop in volatility led to lower trading volumes, which impacted exchange revenues, the report said.
Coinbase’s trading volume in the first quarter of this year was $56 billion, compared to a peak of $177 billion in the fourth quarter of 2021. Bitcoin Exchange Traded Funds (ETF) and overall market maturation have contributed to this decline in trading volume.
To mitigate the impact of declining trading fee revenue, exchanges like Coinbase have diversified their sources of income, the report says. Coinbase generated about a third of its sales in the first quarter of this year from sources other than trading fees. These sources include revenue share on the USDC stablecoin and revenue from its base blockchain.
The company also serves as the custodian for most US spot Bitcoin ETFs and is listed as a custodian for spot. Ether ETF which would need to be approved by regulators, according to the report.
Even though Coinbase’s trading fee revenue is expected to be lower than the 2021 peak, the company’s overall outlook remains positive, according to the report.
Net profit is expected to increase 20 times this year compared to 2023. The sustainability of the current bull market and Coinbase’s ability to maintain its spot market share will be crucial factors in determining its future revenue. Additionally, Coinbase’s diversification efforts and role as an ETF custodian position the company for potential long-term revenue growth.
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