Institutional investors dominate Coinbase’s trading volume but only bring in small revenue

02/25/2023 07:32 • Digital Disruptors • 79 views

According to reports, Twitter user Sovereign Inn said that according to its analysis of the latest financial report of Coinbase, institutional investors contributed 86% of the trading volume ($125 billion) but only contributed 4% of the revenue ($13.4 million) in the fourth quarter, while retail investors contributed 14% of the trading volume ($20 billion) but only contributed 96% of the revenue ($308.8 million). The commission for retail transactions is about 0.75%, and the commission for institutional investors is about 0.5%.

Analysis: Coinbase Q4 retail investors contributed 14% of the trading volume, but contributed 96% of the revenue

Analysis based on this information:

The financial report of Coinbase, one of the biggest cryptocurrency exchanges in the world, has been analysed by Twitter user Sovereign Inn. The report shows that institutional investors dominated the trading volume in the fourth quarter, contributing 86% ($125 billion) to the total volume. In contrast, retail investors only contributed 14% ($20 billion) to the trading volume.

This indicates that institutional investors have greater control over the cryptocurrency market as they contribute a large portion of the trading volume. One reason for this could be that institutional investors have more resources at their disposal, allowing them to engage in high-frequency trading and other strategies that retail investors cannot match.

Despite their dominance in trading volume, institutional investors only accounted for 4% ($13.4 million) of Coinbase’s revenue, while retail investors contributed 96% ($308.8 million) of the revenue. This suggests that although institutional investors are making large trades, their profit margins are greatly reduced.

On the other hand, retail investors, who made much smaller trades, contributed almost all of Coinbase’s revenue. This indicates that although the trading volume of retail investors is significantly smaller than that of institutional investors, they make up for it by making more profitable trades.

The difference in commissions charged by Coinbase for retail and institutional transactions may also explain the disparity in revenues. While Coinbase charges retail investors a commission of about 0.75%, it charges institutional investors a lower commission of about 0.5%. This lower commission could be a reason for the reduced revenue generated from institutional transactions.

In conclusion, Twitter user Sovereign Inn’s analysis shows that the cryptocurrency market is heavily influenced by institutional investors, who are responsible for a large majority of the trading volume. However, despite their control over the market, their contribution to Coinbase’s revenue is quite small, when compared to retail investors who contribute significantly more.

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