02 March, 2024

Coinbase Struggles To Maintain Financial Growth Due To ETFs’ Growing Acceptance

4 weeks ago

13 Feb, 2024

  • Coinbase struggles to maintain its financial growth due to the growing impact of Bitcoin ETFs.
  • A significant portion of Coinbase’s revenue was associated with Bitcoin trading on the exchange.
  • The exchange is a beneficiary, being the custodian of bitcoins for a majority of the ETF issuers.

Recent reports from Leverage Shares, an exchange-traded products provider, unveiled that Coinbase may struggle to maintain its financial growth due to the wider acceptance of Bitcoin ETFs. As analyst Sandeep Rao stated, the introduction of ETFs has lowered the revenue of Coinbase.

Reportedly, a significant portion of Coinbase’s revenue was associated with Bitcoin trading as investors used exchanges like Coinbase to trade Bitcoin. However, with the Spot Bitcoin ETF launch, professional investors turned towards ETFs to directly invest in BTC at lower costs. The analyst cited

Most of the spot bitcoin ETFs offer fees lower than 0.4%, while Coinbase charges between 1.5% to 4%. Therefore, investors may prefer to gain exposure to bitcoin via an ETF, which could cause Coinbase’s revenue from bitcoin transactions to decline. Bitcoin transaction fees are around 17% of Coinbase’s total revenue.

However, the report highlighted a potential growth in the Coinbase (COIN) shares as a result of the flourishing ETFs. Last year, COIN was ranked among the best-performing stocks, surging over 390%. According to the data from MarketWatch, Bitcoin rose 2.65%, while COIN shares have fallen 32%.

Further, the report highlighted the possibility of Coinbase’s revenue hike through the fees derived from Bitcoin custody for ETF providers. Of the 11 Bitcoin issuers, Coinbase serves as custodian for 8, receiving a 0.2% fee in addition to the fees charged for Bitcoin storage.

Analyst Rao added that Coinbase is “likely to be a beneficiary” from being a Bitcoin custodian on a long-term basis. He stated, “As Coinbase charges custodial fees based on the total value of each account, not the number of bitcoins, the price of bitcoin is one of the determinants of the value of the funds held in custody.”



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