it took time to drop stock trading fees from exorbitant to expensive, expensive to zero. A similar price cycle can take place in the crypto world, albeit at a faster pace.
Binance.US, a US crypto company that keeps the more well-known Binance within reach, announced this week that it was cutting trading fees for certain bitcoin trading pairs to zero. The move has created waves as the market for facilitating crypto transactions for fee-based income has built some incredibly large companies.
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In the wake of Binance.US news, shares of US crypto exchange Coinbase lost 9.7% of their value during regular trading on Wednesday.
What seems remarkable at this point is that it appears that the market was not anticipating the directional move of a US exchange to lower its overall fee profile and reduce some trading emoluments to zero. But the writing has been hanging on the wall for a while when it comes to trading fees; Binance.US is just continuing a longer trend.
Costs are going down
Coinbase built a big business on the back of consumer trading costs.
According to the company’s first quarter 2022 earnings report, retail and institutional traders held roughly the same amount of crypto assets on Coinbase, at $123 billion and $134 billion, respectively. But while their assets on Coinbase were comparable, institutional trading volume was much larger, totaling $235 billion in the first quarter, compared to just $74 billion in retail.
So Coinbase made more money from institutional traders than retail business, yes? No.
The opposite even. Coinbase’s retail transaction revenue was $965.8 million in the first quarter of 2022, while institutional operations were worth a much smaller $47.2 million. More simply, Coinbase eats from retailers who pay fees to buy and sell digital assets. (This morning, Coinbase announced an uproar in its consumer business, but with the company saying its new service will offer “the same volume-based fees as Coinbase Pro,” it’s not clear what impact the change will have on company fees stance. )
This is why Binance.US’ move to reduce certain bitcoin trading fees to zero matters – bitcoin made up 25% of Coinbase’s transaction revenue in Q1 2022, up from 16% in Q4 2021. stock market attacks the place where Coinbase makes it live.