Coinbase is Bleeding Customers Pushing the Exchange Out of Top 10



PYMTS | Jul 15, 2022

Coinbase earnings - Coinbase is Bleeding Customers Pushing the Exchange Out of Top 10Coinbase is bleeding customers so quickly that it has collapsed out of the top 10 global cryptocurrency exchanges, dropping from fourth to 14th in just eight months.

While many retail buyers, who make up 95% of Coinbase’s customer base, have fled crypto since the price of bitcoin collapsed 70% beginning in November, it does not explain the depth of Coinbase’s customer losses: it dropped from as much as 9% of global trading volume when crypto prices peaked that month, to just 2.9% at present, Mizuho analysts said in a July 13 research note.

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In late June, Goldman Sachs hit Coinbase with a downgrade, rating it a “sell” and predicting “further degradation” of revenue will force steeper cost-cutting than the 18% layoffs it announced on June 14. Its share price is down 84%.

So what happened?

It’s too easy to blame Coinbase’s tumble on the broader crypto market’s price collapse and growing recession fears, which have combined to drive both institutional and retail clients out of riskier investments, including cryptocurrency.

Then there’s derivatives trading. On July 15, FTX’s 24-hour derivatives volume was about $7 billion, compared to its spot volume of about $2 billion — about $100 million more than Coinbase. The Coinbase Derivatives Exchange launched less than a month ago and its first product, retail-focused bitcoin nano futures (1% of a bitcoin) has seen little interest.

Coinbase’s new and much ballyhooed NFT marketplace has seen little interest either.

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Then there’s the matter of fees. Coinbase may be the best-known cryptocurrency exchange and have a user-friendly front end for new retail buyers, but it charges far more than FTX and other top U.S. exchanges. Coinbase charges about 1.5% for trades above $205 and $0.99 to $2.99 for trades below that level. FTX charges a straight 0.02% maker and 0.07% taker fee, while Coinbase charges makers 0.4% and takers 0.6% below $10,000.

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