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The price war, which trades bitcoin and other cryptocurrencies, is more problematic
Binance.US, one of the largest crypto exchanges, cut commissions for bitcoin trading against the dollar to zero. The company has removed fees for trading bitcoin against Tether, USDCoin and its proprietary token, BinanceUSD. The next three tokens are StableCoin, which aims to manage the peg for $ 1.
Binance.US also announced a new range of pricing structure and said it plans to add more coins to its free-trade range.
Commission-free trading has already boosted revenue models for online stock trading. Brokerages, such as Fidelity Investments,
(Ticker: SCHW), and e-trade, part
(MS), commission-free with Robinhood Markets (HOOD).
Some crypto exchanges are commission-free, especially Robinhood. Exchanges still make money on the spread between coins or crypto / dollar transactions, imposing markups on the trading currency.
(COIN) retailers cling to relatively steep commissions, charging variable fees to buy or sell tokens. For example, to buy bitcoin and ether, you will be charged about 1.5% on Coinbase on Wednesday.
Those charges may now be at risk.
“This is the beginning of the end of Coinbase’s high-fee business model,” says Dan Dolev, Mizuho Securities analyst. “We’re told the fees will eventually go to zero. And it can be very fast – it could be months. The market is very competitive and tight.
Coinbase did not respond to a request for comment.
Another troubling sign is that Coinbase’s trading volume for Bitcoin seems to have risen in a matter of days, a sign that traders are stepping out of crypto, Dolew says. According to a note released by Dolew Wednesday, when Coinbase saw a spike in volume in June, it seems to be more focused on the down days compared to Bitcoin.
“Historically, volumes in Coinbase closely track Bitcoin prices,” he says. “But since the beginning of June, the volume has gone up as prices have dropped. People are running for the exit and not coming back.
Coinbase generates revenues beyond retail, including corporate trading, custodial fees and the platform for trading nonfungible tokens or NFTs. The company recently announced job cuts as it retires.
Yet corporate trade commissions are far less than retail. And by consensus estimates, retail transactions are expected to account for 81% of the company’s $ 4.2 billion revenue in 2022.
Yet with a deep freeze in the crypto setting, investors may be less inclined to pay trading commissions.
Bitcoin, which lost more than a third of its value in June, was trading at about $ 20,500 after last weekend’s drop of less than $ 18,000. Technical and other indicators are not looking good as analysts brace for another potential crash.
Coinbase stock was up 8% on Wednesday, trading at about $ 52.75 and taking its drop to 79% a year so far.
Some analysts are keeping the stock low even though it has low expectations.
BTIG analyst Mark Palmer reiterated a buy rating on shares of Coinbase on Wednesday, but cut their price target from $ 380 to $ 290. He writes that the company has enough liquidity to survive the crypto collapse, and is well positioned to benefit from a shakeout in the market as “challenging crypto market conditions continue”.
For those who have stock and tokens, however, this is a cruel extension. Paying 1.5% to a crypto business can only add insult to injury.
Write to Darren Fonda at [email protected]