Coinbase, the largest cryptocurrency exchange by volume in the United States, is experiencing a significant drop in spot trading volumes as the crypto bear season continues. According to CCData analytics, the popular exchange posted its lowest figures in the last two years during the last quarter, with spot trading volumes standing at $76 billion in Q3 2023. This represents a 52% decrease compared to the previous year.
The decline in trading volumes is indicative of a reduced appetite for crypto trading among investors following a tumultuous period of market policies and falling prices. As a result, Coinbase is predicted to see a 10% drop in revenue, as transaction volumes play a crucial role in generating funds for the exchange. In Q2, transaction fees accounted for 54% of the exchange’s revenues.
Despite the decrease in trading activities, Coinbase’s shares have seen a significant increase, surging over 100% to reach $75, after a turbulent year in 2022 that saw its price drop by 86%. Additionally, Coinbase has recorded a slight increase in market share, even though spot volumes remain at a low level.
The Impact of Large Corporations and Regulatory Scrutiny
The interest of large corporations in traditional finance has played a significant role in the growth of the cryptocurrency market. The exposure of digital assets to a new client base, along with fresh adoption and use cases, has sparked fresh liquidity cycles. However, events in 2022, such as the fall of the Terra Network and the collapse of FTX, have resulted in a decline in institutional investors’ appetite for digital asset products.
Coinbase is not alone in witnessing reduced transaction volumes; market leader Binance has also suffered a similar fate, with its market share dropping for the seventh consecutive month. As a result, exchanges like HTX, DigiFinex, and Bybit have reportedly gained Binance’s lost market share while it faces regulatory scrutiny both in the United States and internationally.
The increased regulatory pressure from the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) has led to lawsuits against Binance, Coinbase, and other platforms. This has created uncertainty among market players. In June, the SEC filed a lawsuit against both Binance and Coinbase, accusing them of offering trading services to unregistered securities, faulty registrations, and commingling of user assets, among other allegations. While both institutions have vowed to vigorously defend themselves, the lawsuits have drawn the attention of global regulators, causing a decrease in user confidence.
