Is the crypto market crash happening at the worst possible time for Coinbase, or could it benefit the exchange and help it move ahead of its competitors? Many investors have managed to make massive profits due to the crypto boom, while trading volumes on crypto exchanges have gone through the roof. There is no doubt that one of the big exchange winners is Coinbase, as it is one of the five largest exchanges in the market as per trading volumes. Plus, it is also the first Bitcoin exchange to trade publicly. It began trading on the Nasdaq at a value of $382 and its market valuation was around $100 billion.
This valuation is a clear indication of how cryptocurrencies have managed to break into mainstream finance. However, after its direct listing, the price of Coinbase has fallen short of inspiring and has declined in tandem with the value of Bitcoin. The exchange’s stock price continues to struggle, even after it has been trading on Nasdaq for a month. The poster-child for crypto, Bitcoin has experienced a major slump after Elon Musk, the CEO of Tesla, criticized it due to its environmental impact. The pioneer crypto lost almost 50% of its value after it was announced by the Chinese government that it would no longer be permitting crypto payments.
The majority of the earnings of Coinbase are generated through Bitcoin trading because the stock price of the US crypto exchange is tied to the market movements of the premier digital asset. It is highly likely that Coinbase’s share price would increase during a crypto boom, which is typically Bitcoin-centric. The opposite is applicable in the case of crypto crashes, as was obvious last week when the exchange’s share price fell. This is primarily because most of Coinbase’s revenue is derived from trading fees, which always happen in a bullish market.
However, things haven’t worked out in the exchange’s favor recently. During peak trading hours, centralized exchanges have had to suffer from downtimes and this has resulted in a loss of reputation and revenue, including Coinbase. Gradually, the exchange is becoming one you don’t want to trade in when Bitcoin is going up. But, experts believe that a crypto crash could be a great environment for diversification where Coinbase is concerned. The exchange reported in an earnings statement that 5% of its revenue is generated from institutional investors, while the majority of its revenue is generated by retail traders.
Kyle Voigt, a Wall Street analyst said recently that monetizing its large customer base was an option for Coinbase. According to him, the exchange can generate almost $100 million from Eth 2.0 staking alone. The institutional market is another area through which Coinbase can generate revenues. The exchange is familiar with the ongoing dynamics and is taking steps to be able to thrive in whatever environment it is in. To further its growth, it is reportedly considering acquiring Osprey Funds, an asset management firm. The expansion of its prime brokerage service recently is also a move in the right direction.