Since the launch of Bitcoin exchange-traded funds (ETFs) in January, there hasn't been a significant increase in trading volume or prices. In fact, Coinbase Global, a leading trading platform, may even be affected negatively by the ETFs, as stated by analyst Dan Dolev from Mizuho.
Before the ETFs were introduced, Coinbase had an average daily spot trading volume of $2.5 billion. However, this volume has fallen to $1.9 billion since their launch. This decline in trading volume is worrisome for Coinbase, which, despite diversifying its revenue streams in recent years, still heavily relies on traders for its earnings.
The introduction of Bitcoin ETFs was expected to reignite retail interest in cryptocurrencies. Although these funds have attracted billions of dollars from investors since their launch, the impact on trading activity and prices has been modest.
As of Monday, Bitcoin was trading at around $42,650. Although it has experienced a 3.4% decline year-to-date, it has still shown an impressive 86% growth over the past 12 months.
According to Dolev, who has given Coinbase an Underperform rating, the ETFs could potentially exert downward pressure on Coinbase's fees.
When contacted for comment, a Coinbase spokesperson referred to prior statements made by CEO Brian Armstrong and President Emilie Choi.
In a January CNBC interview, Armstrong expressed his belief that the ETFs would be a win-win for Coinbase. He anticipated that they would attract new investors to the crypto space and increase activity across various cryptocurrencies and blockchain-related activities, not just limited to Bitcoin.
The Impact of ETFs on Coinbase's Business
Coinbase, one of the largest cryptocurrency exchanges, has stated that they currently have no plans to reduce transaction fees despite the recent launch of new Exchange-Traded Funds (ETFs) by industry giants such as BlackRock and Fidelity.
These new ETFs have been quite successful, attracting a total of $7.3 billion in investments. However, this success has been offset by $5.8 billion in outflows from the Grayscale Bitcoin Trust, which recently converted into an ETF.
While Coinbase acts as a custodian for most of the new ETFs, it is speculated that they might actually be custodying fewer Bitcoin assets than before the ETF launches due to the outflows from Grayscale.
It is important to note, however, that it is still too early to determine the full impact of these ETFs on Coinbase or the broader industry. Institutional investors, who are the target market for these funds, are likely to take some time before purchasing them.
Advisor networks typically require several months of trading and due diligence before adding an ETF to their platform. Additionally, large traders prefer to see assets and volumes reach a sufficient level where their own trades do not significantly impact the market.
Coinbase executives will have the opportunity to showcase the effects of these ETFs on their business when they release their earnings report on February 15th.