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- Buying BTC directly into brokerage kills Coinbase’s transaction revenue.
- The company’s profit comprises 96% of the transaction revenue fees.
- Bitcoin and Ethereum tradings contribute 56% towards the transaction revenue.
Ram Ahluwalia, the CFA and the founder of Peer IQ, has recently raised what he calls a $100 billion question’ for the blockchain company, Coinbase, a recent article by Crowdfundinsider suggests.
Coinbase’s Heavy Dependency on Transaction Revenues
In a recent tweet by Ahluwalia, he asks that if digital currency ETFs are inevitable, consumers will buy BTC directly into their brokerage accounts. In that case, convenience has an upper, which kills Coinbase’s core transaction revenue stream. The PeerIQ founder further adds that Coinbase is heavily dependent on its transaction revenues. To be precise, the total profit comprises 96% of the transaction revenue fees. The crypto community expects the transaction fees to compress from 150 bps to 5-10 bps. Bps refers to the ‘rate’ for esoteric capital market ETFs.
Can Coinbase Function as Credit Card Issuer?
If that is the case, then the source of making money are altcoin trading, staking, inst’l custody, which aren’t as viable and stable as crypto transaction revenue. This is because Bitcoin and Ethereum tradings contribute 56% towards the transaction revenue. Ram further adds that eTrade was sold for about $13 billion, TD Ameritrade was sold to Schwab for $22 billion, and RobinhoodApp secondaries are $20 to $40 billion. All the mentioned companies can offer spot access to crypto as soon as their ETFs are launched.
Ram questions whether Coinbase can make money using credit cards. With Capital One, the leading credit card issuer at $50 billion, the question as to how big Coinbase can become as a card issuer remains in the frame. Moreover, with established giants Van Eck, Fidelity, and BlackRock, Coinbase launching ETFs may be somewhat dicey. To this, Ahluwalia suggests that Coinbase must further specialize and close the wide gap with brokerage and crypto banks.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
