Markets
Crypto Maturity Puts Pressure on Coinbase Trading Revenue
The cryptocurrency market has taken a more mature turn, with price fluctuations becoming less erratic. This change is poised to have a significant impact on the revenue of major exchanges like Coinbase Global Inc. (NASDAQ:PIECE OF MONEY).
What happened: Despite a surge in digital asset activity, the crypto market has seen a decrease in price fluctuations, a major draw 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 Friday.
Despite beating Q1 revenue and profit forecasts, Coinbase’s consumer trading volume was $56 billion, down significantly from Q4’s high of $177 billion. quarter 2021. Bitcoin (CRYPTO) transaction volume: BTC), which contributes significantly to Coinbase’s trading fee revenue, has moderated since the cryptocurrency’s all-time highs in March.
Alesia Haasthe CFO of Coinbase, said: “Volatility seems much more mature in this cycle than it was in 2021. Bitcoin Volatility, Ethereum Volatility (CRYPTO: ETH) are starting to arrive, what I call, on the grid.”
The average volatility of digital assets fell to 57% this year, compared to around 79% in 2021, according to data from CCData.
Other exchanges are also expecting lower volatility this year, in part due to the creation of the Bitcoin spot ETF, which has led to more orderly inflows and less market chaos. Additionally, the prices of tokens, including Bitcoin, are already high, potentially limiting their ability to rise quickly.
Why is this important: This change in market dynamics follows a period of record growth in trading volume on Coinbase’s platforms due to the introduction of spot Bitcoin ETFs. However, the current maturity of the market could pose problems in maintaining this growth.
Coinbase stock has been trading lower recently, perhaps reflecting investors’ 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 streams, 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% at the start of 2023, according to CCData. The company’s prospects will also depend on how long the current bull market lasts, with analysts predicting that if this continues into 2025, Coinbase could generate even more revenue.
Price Action: According to BenzingaProCoinbase closed at $234.76 on Thursday while BTC was trading 0.82% higher at $68,880.69 at the time of writing.
Photo of Useacoin on Shutterstock
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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