Coinbase Stock Rebound Masks Market Share Loss for Peers

(Bloomberg) – The doubling of shares of Coinbase Global Inc. since late June masks one of investors’ biggest concerns – the largest U.S. cryptocurrency exchange is losing ground.

Coinbase’s market share fell to 6.3% in July from 10.7% in January, as measured by global spot trading volume among the top 15 crypto exchanges, according to data from CryptoCompare.

While this year’s market downturn reduced trading volume for all major exchanges, Coinbase suffered more than some of its peers. Retail users, whose business activity makes up the majority of its revenue, are sitting on the sidelines. And Coinbase missed – perhaps for the better, as users may have avoided taking risks – a peak in trading volume in May linked to the fall of Luna, a token it did not take. in charge. Meanwhile, some of its competitors are pushing derivatives and offering lower fees.

Decentralized crypto exchanges such as Uniswap and other competitors may cater to “more crypto-native audiences, which have stuck around during the bear market compared to Coinbase’s customer base, which further skews new crypto users,” said John Todaro, an analyst at Needham & Co., which has a “buy” rating on the stock.

The recent doubling of Coinbase shares should be seen on a longer horizon. Shares are still down more than 60% this year following the collapse of experimental blockchain Terra and the bankruptcy of key players like hedge fund Three Arrows Capital.

Year-to-date, Coinbase has seen a 57.2% drop in cash trading volume. This is more than the 12.9% decline for Binance Holdings Ltd, according to data from CryptoCompare. Binance remains the largest cryptocurrency exchange in the world, with its market share reaching 54% in July.

“There is a greater volume of trading moving offshore as high volume traders and market makers seek to diversify overseas with derivatives and other products that are not currently available in the United States,” Emilie Choi, chief operating officer at Coinbase, told a conference. call Tuesday after the company reported a second-quarter loss of $1.1 billion.

In the United States, competition from Coinbase continues to intensify. Binance US rolled out zero-free trading for Bitcoin, which accounted for 31% of Coinbase’s trading volume in Q2. FTX US adds stock trading to target a wider user base.

For its part, Coinbase recently entered into an agreement for Bitcoin trading with BlackRock, the world’s largest asset manager. BlackRock clients will be able to use its Aladdin investment management system to oversee their exposure to Bitcoin as well as other portfolio assets such as stocks and bonds, and to facilitate funding and trading on the Coinbase exchange.

“As retail trading in cryptocurrency markets continues to slow and competition on exchanges continues to increase, we anticipate that Coinbase will have to seek new avenues to capture new trading volume, such as their recent partnership with BlackRock,” said Jacob Joseph, a research analyst at CryptoCompare. “Reducing trading fees, which are higher than competitors like Binance and FTX, could also help drive additional retail volumes on the platform.”

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