Coinbase has acquired significant notoriety as the biggest publicly traded cryptocurrency exchange in the United States. However, the business appears to have been fumbling the ball as the competition becomes challenging in the cryptocurrency market, leaving it open to competitors.
The company’s stock price dropped by almost 80% since it was at the beginning of the year, and it just recently made news of letting one-fifth of its workforce go. Contrary to Wall Street analysts’ forecasts, the corporation reported a $ 430 million deficit during the first quarter of 2022. A corporation that significantly relies on processing fees for its revenue experienced a decline in its trading activity and the amount of monthly transacting customers compared to Q4 of last year.
The choice to withdraw employment offers made by Coinbase the previous month to individuals who had already agreed on them shows that the exchange recovered more quickly from its setbacks than even Coinbase likely anticipated. However, its rivals have already been patiently waiting for the right opportunity to encircle the American market. The two leading cryptocurrency exchanges in the globe by volume, FTX, and Binance, now are aiming to take advantage of Coinbase’s vulnerability stateside after perceiving its moment of weakness.
The three of the major cryptocurrency companies are vying for market dominance despite having distinct consumer bases. Even while institutions handle the majority of Coinbase’s trading activity, the majority of its transaction revenue is generated from retail investors, making up about 95% of the total.
Considering that its CEO and Founder Sam Bankman-background Fried previously worked at a quant hedge fund, FTX is highly regarded for serving highly experienced traders through its derivatives offerings, which also accounts for the vast proportion of the exchange’s business. Coinbase made its debut in the futures market the previous month, and FTX introduced an institutional trading platform in March of this year.
SBF, which is known in the cryptocurrency community, has been working extremely hard to increase FTX’s appeal to the typical retail investor. In May, he also introduced nil fee U.S. stock trading to make FTX one destination for its clients’ requirements. And besides, since Coinbase’s rise to prominence was largely fuelled by American retail investors, its downfall offers a priceless chance for other exchanges to swoop in and acquire its clients to increase their customer bases and profits.
Hence, it makes logic that Binance wants to entice new retail investors. However, the world’s biggest exchange is still a serious contender in the quest for the American market as it competes with FTX for users. It’s Binance.US, as of July 12, spot trading volumes in the US segment were less than $300 million. Comparatively, this represents a droplet in the ocean compared to its global corporation, which recorded $10 billion in volume for the same time frame, which is almost seven times greater than volumes at FTX and Coinbase.
Currently, 70% of trade volume is accounted for by Binance. As per CEO Brian Shroder in a TechCrunch interview, institutional clients are the source of funding for the US, the global exchange’s American affiliate. However, due in part to Binance’s significant discounts, retail investors make more money overall. He also said that the US provides to its biggest-volume clients.
Unlike FTX, Binance is concentrating on its core strength in cryptocurrencies to lure U.S. retail investors.
“Some exchanges would like to return to trading stocks and focus on that market. Again, there is no right or wrong way to tackle the situation. We are a company that only works with web 3. We’re not going back; we’re heading forward. In an interview with Decrypt earlier this week, Binance founder Changpeng Zhao stated, “We aim to build more web3 products.
The exchange is likewise adopting a much less showy strategy for advertising in the United States. While other rivals like Crypto.com, FTX, and Coinbase splashed millions of dollars only on Super Bowl advertisements during the cryptocurrency bull market, Binance.US stayed fairly quiet.
Binance.US Under Shroder’s direction looks to be rectifying its image, which was previously tarnished by frequent management changes and protracted legal disputes, and making progress in the battle to achieve over American retail investors. Clients will unquestionably be drawn to its tactic, which involves undercutting rivals by charging less.
When compared to FTX.US, which charges a fee of up to 0.20 percent, Coinbase’s fees are ridiculously high, reaching up to 3.99 percent for some spot deals. Whereas Binance.US claimed to have been the first US cryptocurrency exchange to do so, it’s important to remember that exchanges still profit from the spread of transactions even if they do not charge an upfront fee. Binance.US, on the other hand, reiterated its pledge to maintain prices minimal for its clients last month when it introduced fee-free bitcoin spot trading for all customers. Additionally, it launched a staking item the previous month that it claims offers a few of the greatest APY rates in comparison to its rivals, so it stated that it intends to eventually include fee-free trading for even more currencies.
“We are without a question the most affordable provider in this market”, as stated by Shroder.
Shroder provided the following explanation when questioned how Binance.US is capable of offering above-market rates from its staking product: “I guess that when you look at the other firms having significantly lower APYs, it’s just that they are taking that themselves, and we are passing it on to the client.”
Investors generally want cheaper rates and better gains, providing the financially strong Binance with an edge over Coinbase since it might afford to forego U.S. profit margins to draw customers as long as it generates them elsewhere. The same would be true for FTX, which can only provide no-fee stock trading since other areas of its business are profitable.
Binance.US has received positive feedback from clients, while investors have occasionally expressed caution. Nevertheless, in April the business secured its initial outside investment from investors in the form of a $200 million round with a $4.5 billion valuation. The firm’s path to an IPO, which Shroder anticipates will occur within the next two to three years, was made possible by the financing, which was a very crucial first step, as per TechCrunch.
The corporation seems in a strong position to withstand a rough market with the fresh capital and a round extension, which Shroder claims is now on the way. To support its 400 present employees, TechCrunch reports that it is actively recruiting for more than 80 new positions.