How Coinbase has fared against the turbulent U.S. regulatory landscape

Coinbase scooped up a portion of the business from its nearest rivals like Binance.US.
Coinbase reported a total revenue of $708 million in Q2, a fall of 8% from the previous quarter.

Navigating through the tough regulatory landscape of the U.S., cryptocurrency exchange, Coinbase [COIN] has seen an appreciable increase in its market share since its debut on Nasdaq.

As per digital assets data provider Kaiko, the dominance of the largest exchange in the United States grew from 38% in April 2021 to 61% by the end of July 2023.

Source: Kaiko

Coinbase negotiates ebbs and flows

A closer look at the data revealed that the market dominance had surged to 60% during the first quarter of 2023. However, subsequent crackdowns by U.S. regulators and an atmosphere of uncertainty impacted trading volumes.

But the tide seemed to be changing. Increased activity by U.S.-based institutional investors against the backdrop of multiple spot Bitcoin [BTC] filings lifted spot trading volumes on Coinbase.

To add to this, Coinbase scooped up a portion of the business from its nearest rivals like the American arm of Binance – Binance.US. Binance.US has been one of the biggest victims of recent regulatory actions. A large-scale exodus of jittery market makers sucked liquidity out of the trading platform. The exchange is yet to recover from this blow.

This could also be understood by analyzing the exchange outflows of Bitcoin. Since the lawsuit in early June, the rate at which traders withdrew their BTC holdings from Coinbase was considerably lower when compared to that of Binance.

Source: CryptoQuant

In Binance’s case, the outflows increased by more than 3x within a span of three days, as evident below.

Source: CryptoQuant

Coinbase publishes Q2 earnings

Coinciding with the aforementioned developments, Coinbase released its Q2 earnings report. The company reported a total revenue of $708 million, a fall of 8% from the previous quarter. Coinbase attributed the fall in transaction revenues to “multi-year lows in crypto volatility.”

Coinbase’s financial assets strengthened by $5.5 billion in U.S. Dollar (USD) resources, representing a 3% increase from Q1. Shares of Coinbase jumped 6% to $96 following the disclosure of the earnings. However, they soon retreated and closed at $90.75 as of 3 August.

In the report, Coinbase fiercely denied the claims brought against it by the United States Securities and Exchange Commission (SEC) and stated that it would file a motion to dismiss the case.

CEO Brian Armstrong recently shocked the crypto industry after revealing that the SEC had requested the exchange to cease trading of all cryptocurrencies other than Bitcoin.

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