Michaël van de Poppe - 23 March 2022
Coinbase becoming a crypto one-stop-shop
Despite the bearish market sentiment that is currently present in the crypto industry, some companies just keep building and expanding. One of those companies is the well-known crypto exchange Coinbase. Recently, it revealed their partnership with Mastercard for NFT payments and not too long ago Coinbase had acquired FairX, a licensed US-based derivatives exchange.
It is clear that Coinbase is working towards becoming a one-stop crypto shop for American traders and investors, covering all the essentials. Let’s dive into the areas Coinbase is focussing on and highlight why those are so important for the future of the exchange.
What is Coinbase?
Coinbase is a crypto exchange that focuses mostly on spot trading and making crypto accessible to a retail and institutional audience. The company was founded all the way back in June 2012 and in its nine years of existence, it has grown to one of the largest crypto exchanges in the world, in terms of spot trading.
Regarding trading volume, Coinbase experienced exponential growth this past year. During the third quarter of 2020, the exchange had a volume of $45bln. Now, a year later, that number has increased by over 600% to $327bln.
In 2021, the exchange had its most volume in the first two quarters of the year. This is also reflected in the net revenue of the company which you can find below. Coinbase had a significantly higher net revenue in the first two quarters.
The recent bearish crypto markets have led to a decrease in both volume and revenue. Still, Coinbase has pulled impressive numbers which shows the rise in popularity of crypto under retail and how much this space has grown over the past year, year and a half.
Besides spot trading, Coinbase has been working on expanding its suite of products to other venues. We believe Coinbase is going to be one of the largest all-around crypto platforms for retail and institutions, more so than it already is.
Coinbase acquires FairX
On January 12th, 2022, Coinbase announced its acquisition of FairX, a US-based derivatives platform. This is a very important step for Coinbase as it is now in the position to launch crypto derivatives products in the United States.
Due to licenses and US regulation, only a handful of exchanges are allowed to offer crypto derivatives to their customers. Coinbase, by far the largest US crypto exchange, is eager to expand to this market as it would attract even more customers and generate their company a lot of revenue.
With this move, it follows FTX, also a crypto exchange. FTX acquired LedgerX with similar goals. It shows the growth and money these crypto exchanges have made over the past year. It sets them in the position to expand their product suite to become even more powerful.
Coinbase and NFTs
Back in October of last year, Coinbase announced its NFT marketplace. Another significant milestone of expansion for the crypto exchange. Also, a very smart move. NFTs appeal to a huge audience and are arguably in more demand than cryptocurrencies. The rise of OpenSea over 2021 and the billions of revenue that the platform has generated reflects the influence of NFTs on the market.
The decision from Coinbase came as no surprise as other notable crypto exchanges have also announced their NFT platform among others are Binance and FTX. All the exchanges are eager to take over market share from the decentralized NFT marketplace OpenSea.
The technical barriers and high fee costs prevent a large audience from entering the NFT space. Although, with exchanges such as Coinbase, FTX, and Binance facilitating NFT trading it will be possible for those people to finally participate in this niche market.
Yesterday, Coinbase announced a major partnership that makes it even easier for people to use Coinbase for their NFT trading. Coinbase has established a partnership with Mastercard to facilitate payment traffic on their upcoming NFT marketplace.
Users will be able to buy and sell NFTs using the credit and debit cards of Mastercard. This is huge for the exchange as it has a direct route for users to use the market without having to be in the custody of any cryptocurrencies.
Coinbase browser wallet
Last but not least, Coinbase has developed its own browser-injected crypto wallet. It allows users to easily connect to Coinbase and crypto dApps. This makes it easier for traders and investors to use DeFi dApps, but if necessary return to Coinbase.
Decentralized Finance is a very prominent and important sector within the crypto industry. The effort and commitment of Coinbase to develop their own browser-injected crypto wallet show the interest they have in connecting their exchange with the broad on-chain DeFi sector.
Even though users are moving away from the Coinbase platform, we still think it is a great move by Coinbase as they make it very easy for their customers to venture off to other crypto venues, yet remind them that Coinbase is still the platform to come back to.
2020 and 2021 marked the rise of cryptocurrencies and their entry into the real world. The rise in popularity lead to an increase in demand for cryptocurrencies and undoubtedly exchanges were among the biggest winners due this growth. Over the past year and a half, exchanges have seen their website traffic and trading volume skyrocket as more and more people entered the space.
Among them is Coinbase, one of the largest crypto exchanges in the world regarding spot trading. In the past few months, the exchange has shown its interest in expanding its product suite by acquiring FairX, announcing its NFT marketplace, and the release of the Coinbase browser wallet. These are significant events and each event is beneficial to a certain specific audience.
The introduction of derivatives on Coinbase allows traders to speculate in other ways on the price of cryptocurrencies. The release of an NFT marketplace with a Mastercard integration makes it, even more, easier for people to participate in the NFT market that has experienced skyrocketing growth in 2021. Finally, the browser wallet allows users to make use of dApps, such as lending, staking, and yield farming dApps.
All these developments are building towards Coinbase becoming the one-stop crypto shop for retail. Covering all the essentials: trading, speculating, NFTs, DeFi. We are eager to see this all come to fruition (hopefully) this year.