Retail clients on Coinbase seem to be at the receiving end of a bad deal with ridiculously high retail fees. A recent interview with Jim Chanos further throws light on this while revealing that retail clients are essentially behind Coinbase’s yearly revenue.
Coinbase is also touted as the company with the first-mover advantage in the crypto space. This is because the exchange introduced Bitcoin to the layman while serving as a reliable fiat-to-crypto on-ramp to retail crypto investors. Therefore, in this article, you will discover more about how Coinbase manages its relationships with its retail clients.
Coinbase And Its Retail Clients
2022 has been a terrible year for Coinbase with poor Q1-2022 with very low earnings and several other macroeconomic factors. Therefore, Coinbase is planning to lay off an estimated one-fifth of its entire workforce (an estimated 1,100 people).
As a result, the crypto exchange cited a drop in its stock prices as well as the current crises in the crypto space as the reason behind its decision.
Amidst these announcements, there have been complaints about the company’s strategy, especially about its retail clients. This along with its first-mover advantage makes it the first port of call for retail crypto investors. However, is Coinbase taking undue advantage of these clients? A recent review of its retail fees seems to support this notion. Jim Chanos, in a recent interview also reveals that retail clients are basically behind Coinbase revenue.
At least as of Q1, there's still plenty of speculative activity in this market. pic.twitter.com/3BlQGa1t5N
— Joe Weisenthal (@TheStalwart) June 16, 2022
Also, the interview reveals that the exchange in Q1 2022, “[…] earned almost a billion dollars in commission revenue from retail traders during the quarter.” It’s important to mention that institutional-grade clients paid less than $50 million as commission during the same period.
Moreover, Chanos said: “On a dollar value of trading value, retail is paying almost 60 times the rate of institutions”. This is outrageous and does not portray the exchange in good light. As Chanos puts it, “[…] this is borderline predatory behavior in the industry.”
A few really fascinating nuggets from our Jim Chanos interview.
First, it's just really staggering the degree to which Coinbase has been milking their retail clients for fees. $COIN https://t.co/5NzhjA5Qbj pic.twitter.com/T3dPzZ5nwY
— Joe Weisenthal (@TheStalwart) June 16, 2022
More About Coinbase
Coinbase is a secure exchange platform for buying, selling, trading, and storing cryptocurrency. It is also currently one of the biggest exchanges available today. Coinbase’s main focus is to facilitate the development of an open financial global ecosystem. The exchange is also a one-stop shop for crypto services that provides a wallet, an exchange, and other essential tools in a single interface.
Since its inception, Coinbase plays a powerful role as a major fiat-to-crypto on-ramp. Providing its users with the opportunity to seamlessly purchase Bitcoin and top Altcoins using fiat currencies. As a result of this, there’s been a huge influx of retail users into the crypto space.
Conclusion
To continue to remain relevant in the crypto space, Coinbase needs to facilitate a more sustainable investing environment for all its users (retail or institutional). The exchange also needs to review its strategy, making sure not to misuse its first-mover advantages.
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