Coinbase Expands Income Streams Amidst Evolving Cryptocurrency Trading Landscape

The digital asset market has seen a significant year, edging closer to widespread acceptance.

As reported by Bloomberg on Thursday (May 30), this trend towards adoption has led to reduced price fluctuations, which were once a major draw for investors.

With the market’s movement, Coinbase, the biggest crypto exchange in the United States, has seen a dip in trading volume by individuals and a potential shift in its income model, the report outlines.

Market volatility for digital currencies has shown a marked decrease recently. Research from CCData indicates that the average volatility rate has fallen to 57% this year, a drop from the previous 79% in 2021, as noted in the report.

This lower level of volatility is interpreted as an indication of the market’s maturity, leading to a diminished interest from speculative traders, the report elaborates.

Exchanges such as Coinbase are dependent on the fees from cryptocurrency trading volume for their revenue. Yet, the waning volatility has led to lesser trading activities, thereby affecting the income of these platforms, as stated in the report.

During this year’s first quarter, Coinbase’s retail trading volume reached $56 billion, which is significantly lower than the $177 billion peak in the last quarter of 2021. Developments in Bitcoin ETFs and the general advancement of the market have influenced this decrease in trading volume.

To compensate for the diminishing trading fee-based income, exchanges like Coinbase have broadened their revenue streams, according to the report. Non-trading fee income, including profits from the USDC stablecoin and Coinbase’s Base blockchain, made up about one-third of Coinbase’s sales in the initial quarter of the year.

Moreover, Coinbase acts as a trustee for the majority of the U.S. Bitcoin ETFs in the spot market and is named as a custodian for upcoming Ether ETFs awaiting regulatory approval, the report mentions.

Although the revenue from trading fees at Coinbase is anticipated to stay below the zenith of 2021, the forecast for the company continues to be optimistic, per the report.

The projections show net income could surge by 20 times in comparison to 2023. The persistence of the current bull market and Coinbase’s ability to retain its share in the spot market are crucial for its forthcoming revenue. Moreover, Coinbase’s diversification strategies and its role as ETF custodian provide a foundation for potential long-term income expansion.