The cryptocurrency market has taken a more mature turn, with price swings becoming less erratic. This shift is poised to significantly impact the revenue of major exchanges like Coinbase Global Inc. (NASDAQ:COIN).
What Happened: Despite a surge in digital asset activity, the crypto market has experienced a decrease in price fluctuations, a major draw for many investors. This shift is expected to significantly impact the primary revenue source of major exchanges like Coinbase, Bloomberg reported on Friday.
Despite exceeding first-quarter revenue and profit projections, Coinbase’s consumer trading volume was $56 billion, a significant drop from the $177 billion peak in the fourth quarter of 2021. The trading volume of Bitcoin (CRYPTO: BTC), which significantly contributes to Coinbase’s trading-fee revenue, has been subdued since the cryptocurrency’s all-time highs in March.
Alesia Haas, Coinbase’s CFO, said, “Volatility looks much more mature in this cycle than it did in 2021. Volatility of Bitcoin, volatility of Ethereum (CRYPTO: ETH) start to come, what I call, on the grid."
The average volatility for digital assets has decreased to 57% this year, from about 79% in 2021, as per data from CCData.
Other exchanges are also anticipating lower volatility this year, partly due to the creation of the spot Bitcoin ETF, which has led to more orderly inflows and less market chaos. Additionally, token prices, including Bitcoin, are already high, potentially limiting their ability to rise rapidly.
Why It Matters: This shift in market dynamics follows a period of record growth in trading volume across Coinbase’s platforms due to the introduction of spot Bitcoin ETFs. However, the current market maturity could pose challenges to sustaining this growth.
Coinbase’s stock has been trading lower recently, possibly reflecting investor concerns about the market’s changing dynamics.
Despite the potential impact on Coinbase’s revenue, the company’s future remains promising. Its net income is projected to increase significantly this year, and the company has already diversified its revenue sources, relying less on trading fees than it did in 2021.
Furthermore, Coinbase’s ability to retain its spot market share will be crucial, especially as its share dropped to 4.18% in May, from 6.5% at the beginning of 2023, according to CCData. The company’s outlook will also depend on the duration of the current bull market, with analysts predicting that if it continues into 2025, Coinbase could generate even more revenue.
Price Action: According to Benzinga Pro, Coinbase closed at $234.76 on Thursday while BTC was trading 0.82% higher at $68,880.69 at the time of writing.
Photo by Useacoin on Shutterstock
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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