Coinbase Explores New Ways to Boost Revenue: Spot Bitcoin ETFs Could Pose a Challenge for the Exchange

• Coinbase Global executives have been saying for months that they are looking to diversify their revenue streams, regardless of what happens in crypto trading.
• This year, Coinbase shares have surged by 101% to $70.96, but they are still far below the levels seen in 2021 when they were above $340.
• An ETF of this nature could support the price of the token while making it easier and potentially cheaper for investors to buy and own Bitcoin, erasing part of Coinbase’s user base.

Coinbase exchange is aiming for more than the income it generates from its trading service, but for now there is no alternative other than Bitcoin.

Coinbase is aiming to diversify its revenue

Coinbase Global executives have been saying for months that they are looking to diversify their revenue streams, regardless of what happens in crypto trading. However, the company is currently heavily reliant on investors and, in particular, Bitcoin, the largest token in the cryptocurrency market.

This message comes from a report published last week by crypto data provider Coin Metrics. Despite increasing the number of currency pairs tradable on the platform from 100 in 2021 to more than 600 currently, Bitcoin and the second-largest token, Ethereum, continue to account for about half of the activity. The Coin Metrics report stated:

“This just shows that adding new assets is not a guaranteed way to generate trading fee revenue.”

Coinbase has also added non-trading revenue sources, such as services that allow you to stake your tokens in exchange for yields. It has also started earning money from the reserves held to support rising yields and to back the stablecoin USDC. However, the company’s fate still heavily depends on its trading activity. According to the report, “Coinbase’s stock price ($COIN) closely tracks spot volume.”

Executives are working to move away from revenue generated by trading and see the company as more than just an exchange, envisioning it as a primary gateway for people interacting with all aspects of the crypto ecosystem.

This year, Coinbase shares have surged by 101% to $70.96, but they are still far below the levels seen in 2021 when they were above $340. Similarly, Bitcoin, which traded at nearly $64,000 just a few years ago, is still far from its all-time high at around $26,500.

Currently, there are no signs of a rapid recovery in crypto trading activity. Overall, exchanges are managing daily volumes at about half of what they were a year ago and earning less than one-fifth of the levels seen during the 2021 bull run.

ETFs Could Pose a Challenge for Coinbase

Some crypto investors have seen the potential start of a spot Bitcoin exchange-traded fund (ETF) as a catalyst. Last month, a court said that the Securities and Exchange Commission (SEC) made a mistake when it rejected crypto firm Grayscale Investments’ proposal to convert the Grayscale Bitcoin Trust.

However, even this launch could pose a double-edged sword for Coinbase. An ETF of this nature could support the price of the token while making it easier and potentially cheaper for investors to buy and own Bitcoin, erasing part of Coinbase’s user base. Meanwhile, the company is also facing a separate lawsuit where it has been accused of operating as an unregistered securities exchange by the SEC, which it has denied and is fighting against.

Company executives remain hopeful that they will ultimately prevail in court and that crypto traders will return as they have in past cycles. The stakes are high for Coinbase investors.