Coinbase, once a dominant force in the US crypto market, has experienced a significant decline in market share in recent months. According to a report by research firm Kaiko, Coinbase’s market share has dropped from 55% in March to 41% in early September. This decline has been accompanied by the rise of smaller exchanges such as Bullish, whose market share nearly doubled from 17% to 33% over the same period.
Bullish, founded in 2021 as a subsidiary of blockchain firm Block.one, has positioned itself as a key player in the institutional crypto trading space. Unlike Coinbase, which primarily serves retail investors, Bullish has focused on catering to institutional clients. Backed by PayPal co-founder Peter Thiel, Bullish has made significant moves in the market, including the recent acquisition of crypto-focused media outlet Coindesk.
The overall market dynamics have shifted, with the top US exchanges now controlling nearly 90% of the market, up from 66% in April 2021. This consolidation has been driven by factors such as stricter regulations, reduced trading activity during the bear market, and the dominance of major players like Coinbase and Kraken in institutional crypto trading. The collapse of FTX in 2022 and regulatory actions against Binance.US have also played a role in reshaping the market.
Coinbase’s declining market share coincides with British bank Barclays upgrading its stock rating from underweight to equal weight. Analyst Benjamin Budish highlighted Coinbase’s maturation through product expansion and improved economic prospects. He also noted the potential benefits of a more favorable regulatory environment for the exchange. However, uncertainties remain, particularly around ongoing regulatory challenges and broader economic conditions. The unresolved Securities and Exchange Commission (SEC) lawsuit against Coinbase adds a layer of complexity to its operations.
Despite the challenges faced by Coinbase, its stock has shown some resilience, with a 5% increase in early trading. However, the company’s year-to-date performance reflects a 10% decline. The market observers are keeping a close eye on how Coinbase navigates these challenges and positions itself in an evolving regulatory landscape.
The rise and fall of Coinbase reflect the dynamic nature of the crypto market and the challenges faced by prominent players in the industry. As smaller exchanges gain ground and regulatory uncertainties linger, Coinbase must adapt and innovate to maintain its competitive edge in the rapidly changing landscape.