Are Cryptocurrency Trading Fees Going To Zero?

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It took time to see stock trading fees go from exorbitant to high and expensive to zero. A similar pricing cycle could be happening in the world of cryptocurrencies, albeit at a faster pace.

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Binance.US, the American crypto company that holds the more famous Binance at arm’s length, announced this week that it is reducing trading fees for certain bitcoin trading pairs to zero. Traffic made waves because the market for facilitating crypto trading for commission income has created some incredibly large enterprises.

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In the wake of the Binance.US news, shares of the American crypto exchange Coinbase lost 9.7% of their value during regular trading on Wednesday.

What is remarkable at this stage is that the market does not seem to have anticipated a directional move by the US exchange to lower the overall commission profile and reduce some trading fees to zero. But when it comes to trading fees, nothing is known. Binance.US is just continuing a longer trend.

Fees are declining

Coinbase has built a massive company through consumer trading fees.

According to the company Profit and loss statement for the 1st quarter of 2022, retail and institutional traders had roughly the same amount of crypto assets on Coinbase — $123 billion and $134 billion, respectively. But while their holdings on Coinbase were similar, institutional trading volume was much larger, totaling $235 billion in the first quarter, compared to $74 billion in retail trading.

So, Coinbase made more money from institutional traders than from retail, right? Nope.

Actually the opposite. Coinbase’s retail transaction revenue was $965.8 million in the first quarter of 2022, while institutional activity was worth much less at $47.2 million. Simply put, Coinbase is powered by retail traders who pay fees to buy and sell digital assets. (This morning Coinbase announced shake-up in its consumer goods trading business, but the company said its new service will offer “the same volume-based fees as Coinbase Pro,” and it’s unclear what effect the change will have on the company’s fee position.)

That’s why Binance.US’ move to cut some bitcoin trading fees to zero is irrelevant – bitcoin generated 25% of Coinbase’s transactional income in the first quarter of 2022, compared to 16% in the fourth quarter of 2021. his life.

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