Bitcoin ETFs threaten Coinbase

Coinbase's market dominance is threatened by Bitcoin ETFs. Its share price is falling significantly. What will happen to the crypto exchange?

The crypto exchange Coinbase Global is likely to face a decline in revenue and profits as more investors trade Bitcoin in the future via favorable ETFs. Potential Coinbase customers are being lured to established brokerage platforms with lower transaction fees following the approval of Bitcoin ETFs last week.

Coinbase's share price has risen nearly 400 percent over the past year, coupled with growing excitement over the expected adoption of the Bitcoin ETF. From its high of $186 in late December, the share price, however, fell dramatically and now stands at just $124.

Coinbase has long been considered a titan with significant influence and market dominance in the crypto sector. The approval of cheap Bitcoin ETFs however, has now sparked speculation about their ability to dethrone market leader Coinbase.

No fewer than eight of the 11 ETF listings list Coinbase as a custodian, but the company has yet to disclose its custodial fees. Analyst Michael Elliott of CFRA Research thinks the increase in custody fees will not be enough to offset investors' loss of Bitcoin ETFs.

Nearly half of Coinbase's revenue comes from transaction fees. Coinbase charges up to 0.6 percent for transactions up to a value of $10,000, while BlackRock, for example, starts with a fee of 0.12 percent.

For smaller transactions up to $1,000, the fee at Coinbase is even between 1.5 percent and 3 percent. This could put pressure on the company to lower fees and spreads in the future, which would mean a loss of revenue.