- A SEC complaint last week put Coinbase under strain amid the crypto crackdown
- According to analysts, Robinhood is gaining market share from Coinbase in the crypto space
- The decline in Coinbase’s market share has caused the focus to shift to European markets as potential areas of expansion
Retail Bitcoin traders from Coinbase Global Inc. may be switching to Robinhood Markets Inc., said Mizuho Securities analyst Dan Dolev.
According to Dolev, data from April suggests that the company may be losing market share in terms of the volume of retail cryptocurrency transactions to Robinhood, a trading software that rose to prominence due to its popularity among at-home stock traders.
- Robinhood Market Share | Credit: Robinhood.com
Dolev commented that other than concerns about regulatory pressures in light of SEC investigations against cryptocurrencies or the rise in small-ticket item retail trading fees at Coinbase, there is no ideal reason for prospective share losses.
SEC Attacks Coinbase and Binance Making Them Losing Market Share
The US Securities and Exchange Commission (SEC) recently sued the exchange, claiming that some digital coins are securities, which intensified the pressure from regulators. One day prior, a more extensive lawsuit was filed against Binance Holdings Ltd., a rival cryptocurrency trading platform.
According to the SEC’s accusations against Coinbase, Coinbase allegedly used its platform for trading cryptocurrencies as a national securities exchange and broker that was not registered.
When Coinbase was given the go-ahead to list, it was regarded by investors and enthusiasts as a significant accomplishment.
Two years later, Coinbase and Binance, its main rival, are in trouble with the SEC. The likelihood of both cryptocurrency exchange platforms failing would undoubtedly result in a massive market gap as well as even more volatility in the cryptocurrency trading sector.
Dolev’s underperform rating and Street-low $27 price target makes him one of the most bearish analysts covering Coinbase.
Besides concerns about regulatory pressures in light of SEC investigations against cryptocurrencies or the rise in small-ticket retail trading fees at Coinbase, Dolev noted, “there is no perfect explanation for potential share losses.”
Dolev’s study of the shareholder letter from Coinbase and the monthly metrics report from Robinhood suggests that either Coinbase is losing market share to Robinhood or that their take rates—the amount of money they make from each transaction—have dropped. Dolev cautions against making the assumption that retail take rates increased or decreased.
“There is no doubt Coinbase is in a stronger business position as a result of these efforts. We say this irrespective of the Wells Notice we recently received from the SEC. We see this as an opportunity to continue pushing for a clear rule book in the US for crypto regulations”, the company wrote in the letter.
It added that the US cannot afford to lag behind in this crucial area of technology that has the potential to modernize the banking system and save 1 million American jobs.
“We continue to be encouraged by the broad bipartisan support for crypto legislation, and we will fight for regulations for our sector,” Coinbase asserted.
Dropping Shares
In line with a broader decline in stocks tied to cryptocurrencies, Coinbase shares dropped as high as 5.5% on Thursday before reducing the loss to be little-changed. The stock has gained around 50% so far this year. Robinhood swung back and forth between modest gains and losses.
On the other hand, the largest cryptocurrency exchange in the world, Binance, has seen a decline in market share over the last three months as a US watchdog investigates possible federal law violations.
At its height in February, the group, which claims it has no headquarters, held 57.5% of the global average monthly volume on cryptocurrency exchanges. But as of right now, CCData , a research firm, reports that figure to be 43%.
The removal of three cryptocurrency tokens from Robinhood Markets’ platform was announced last week, days after the U.S. Securities and Exchange Commission took action against the top exchanges in the sector.
As of June 27, customers won’t be able to trade Solana, Cardano, or Polygon through Robinhood, the online brokerage announced.
Euro-Orientation for Coinbase
The markets in France, Spain, Italy, the Netherlands, and Switzerland were added to Coinbase’s service last year. The UK is currently its biggest overseas market.
Recently, Peter Stilwell, Head of Business Operations & Strategy for Coinbase’s EMEA division said Europe is very significant to the medium-term strategy of Coinbase.
“Europe is our biggest region. This is the reason we are going out and registering in several European markets” he said during the launch of Base, their Ethereum Layer 2 network, back in March.
“We are localizing our solution to European clients, and that’s why we’re seeking for partnerships in Europe as well,” he added.
Stilwell also said that with offices in Germany and Ireland, it will be a fantastic opportunity for Europe to be at the forefront of cryptocurrency regulation with MiCA on the horizon.
For Coinbase, which already describes itself as the “most regulated” exchange, MiCa, which would impose stronger regulations on the EU crypto industry, presents an opportunity.
Stilwell stressed Europe means stepping in the right direction. It is hoped that it will continue to develop along with the industry and add components for things like stablecoins, DeFi, and self-custodial wallets. That, according to Stilwell, will be crucial.
“So far, I have been pretty impressed with the EU’s approach to regulation. I like their willingness to collaborate, listen, and work on making something that protects customers but doesn’t stifle innovation,” he concluded.
