In recent months, Coinbase has experienced a sharp decline in market share according to a report by research firm Kaiko. Earlier this year, Coinbase dominated more than half of the US crypto market share, reaching almost 55% in March. However, as of early September, its market share has dropped to 41%, down from 53% in June.
The biggest beneficiary of this shift has been Bullish, a cryptocurrency exchange whose market share nearly doubled from 17% to 33% over the same period. Unlike Coinbase, Bullish primarily targets institutional clients and trading. Founded in 2021 as a subsidiary of blockchain firm Block.one, Bullish is backed by PayPal co-founder Peter Thiel and recently made headlines for its acquisition of crypto-focused media outlet Coindesk.
Top US exchanges have significantly expanded their market share since 2021, with the three largest exchanges now controlling nearly 90% of the market, up from 66% in April 2021. Smaller exchanges, on the other hand, have seen their share shrink from 34% to 11%. This shift can be attributed to various 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 dominance of major players like Coinbase in the crypto market has also been impacted by regulatory actions against other exchanges. The sudden collapse of FTX in 2022 and regulatory scrutiny against Binance.US have led to market share collapses for these firms. Despite the declining market share, Coinbase received an upgrade from British bank Barclays, with the stock being upgraded from underweight to equal weight. Analyst Benjamin Budish noted that Coinbase has shown maturity through product expansion and improved economic prospects.
Market observers expect Coinbase to benefit from a more favorable regulatory environment in the future, especially with potential support from US presidential candidates for the crypto industry. The unresolved Securities and Exchange Commission (SEC) lawsuit against Coinbase does cast a shadow over its operations, but there is potential for the exchange to emerge as a winner in the regulatory shift. However, uncertainty remains, particularly around broader economic conditions and ongoing regulatory challenges. Despite these challenges, Coinbase’s stock has seen a slight increase in early trading, but its year-to-date performance has declined, with its stock down 10%.
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