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Coinbase Expands Revenue Sources as Cryptocurrency Trading Matures
Digital assets have had a significant year, with the market moving towards mainstream adoption.
This change resulted in a decrease in price volatility, which had been a key attraction for many investors, Bloomberg reported Thursday (May 30).
As a result, the largest cryptocurrency exchange in the United States, CoinBaseAccording to the report, it has seen a decline in consumer trading volume and a potential change in its revenue sources.
Volatility in the digital asset market has decreased significantly in recent times. According to the researcher CCDataaverage volatility for digital assets fell to 57% this year, compared to around 79% in 2021, the report said.
According to the report, this decrease in volatility is seen as a sign of market maturation, as it attracts fewer speculative traders.
Coinbase, like other exchanges, relies on trading fee revenue generated from cryptocurrency trading volume. However, the decline in volatility has led to a reduction in trading volumes, impacting trading revenue, according to the report.
Coinbase’s consumer 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 theirs sources of income, the report states. 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 custodian for most spot Bitcoin ETFs in the US and is listed as custodian for spot Ether ETF which would need to be approved by regulators, according to the report.
While Coinbase’s trading fee revenue is expected to be lower than its 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 spot market share will be crucial factors in determining its future revenue. Additionally, Coinbase’s diversification efforts and its role as an ETF custodian position the company for potential long-term revenue growth.
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