Analysts warn that Coinbase’s medium-to-long-term performance could suffer as newly launched Bitcoin spot ETFs challenge its market share.
Senior Researcher at Leverage Shares Sandeep Rao believes fast-rising Bitcoin funds like BlackRock and Fidelity are now competing with Coinbase for trading volume, challenging its longstanding market position as “the dominant venue for all things crypto.”
“Several funds offering fee waivers for the next few months will seemingly reduce Coinbase’s fees,” Rao wrote in an email shared with Cryptonews. “But reduced trading volume since approval is likely to sting more over the next few quarters.”
Coinbase’s Bitcoin Trading Revenue
To draw investors, several Bitcoin spot ETFs dropped their management fees to zero before launching last month, becoming some of the cheapest venues for institutions to trade and hold BTC.
The new funds have already absorbed over $10 billion since launch. Grayscale – their largest incumbent competitor – has suffered nonstop outflows totaling $6.6 billion over the same period, having decided to keep its sponsor fee at an elevated 1.5%.
BlackRock’s Bitcoin ETF in particular is already overtaking Grayscale on daily volume, averaging $750 million volume per day earlier this week. As of Thursday, Coinbase’s 24-hour BTC volume stood at roughly $900 million, per CoinMarketCap.
After publishing its Q4 earnings today, Coinbase has suffered several consecutive quarterly losses since 2022, despite the Bitcoin market rallying to new highs during that time.
Competition from other trading venues is likely to make those figures worse – especially given that roughly half of the firm’s revenue still comes from trading fees.
Coinbase As A Bitcoin ETF Custodian
Coinbase also draws revenue from subscriptions and services, including USDC yield and its custody platform earnings. Its platform provides Bitcoin custody for competitors like BlackRock and Grayscale, offering some exposure to their success.
Still, this won’t make up for Coinbase’s loss in transaction revenue, according to Rao. “Any indications during the Q4 earnings call of a strategy change to address this shortfall would be valuable.”
“Now that Bitcoin ETFs have such a strong precedent, other exchanges are well-positioned to compete, collect ETF transaction fees, and even devise structures to perform custodian services,” he concluded. “Coinbase cannot assume that it will remain America’s only real crypto exchange unless it indicates a move towards measures will help it stay central to the crypto market.”