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Crypto Winter? U.S Regulations? What has Caused Half Coinbase’s Trading to Fall in 2023?

Last Updated October 12, 2023 2:18 PM
Teuta Franjkovic
Last Updated October 12, 2023 2:18 PM
Key Takeaways
  • Coinbase witnessed a remarkable 50%+ decline in spot trading volume since last year.
  • Despite this dip, Coinbase managed to gain market share.
  • Some exchanges, such as OKX, HTX, Gate.io, and Bitmart, have seen noticeable increases in website traffic YTD.

During crypto downturns, trading volumes on significant centralized exchanges suffer significantly, and Coinbase is no exception. Those who impose high transaction fees, like Coinbase , may experience a decline in profits due to a drop in volume.

The challenges to the general crypto sector were almost tangible this year, with crypto winter continuing to freeze, and the SEC’s actions.

A Regulatory Chill or Shifting Dynamics?

One of the biggest cryptocurrency exchanges in the US, Coinbase, has seen a more than 50% decline  in spot trading volume, signaling a change in interest in the market.  

Certainly, market sentiment has been impacted by US regulatory action. The legal ambiguity is probably having a negative effect on the regulatory-thin-skinned crypto firms. 

In the year 2023, US regulatory authorities have cracked down on illegal cryptocurrency activities with a flurry of litigation and settlements, raising concerns in the sector that the crypto industry will either leave the US, relocate abroad, or shift to alternate trading platforms. 

A key case in the U.S., Ripple’s sale of XRP to institutional customers was illegal securities sales, according to Judge Analisa Torres’ July ruling, despite the fact that some of its XRP transactions fell short of the requirements for a securities offering. 

For many exchanges, it appeared that the language was sufficiently explicit, or at the very least, their legal teams believed they could weather any negative legal fallout from this decision. 

In light of many exchanges’ problems, it must be said that listing and trading a coin that was labeled as “not a security” made sense. 

Because of the hype and volatility surrounding coins, exchanges make money since there are more opportunities for transaction volume and fees as a result of greed and fear.

However, due to the apparent success of Ripple, exchanges, and players may be excessively hopeful, but the possible return from reopening outweighs the danger of lawsuits and penalties. 

A Year of Decline Amid Cryptocurrency Market Shifts

Reports  show that Coinbase recorded almost $76 billion in spot trading volume, citing research from the digital asset analytics company CCData. The latest data reveals a 52% decline in spot trade for Q3 2023 when compared to its quarterly record for the third quarter of 2022. 

The current figures, according to the research, are at their lowest levels since before Coinbase went public on the Nasdaq Stock Market in 2021, a year that also saw the height of cryptocurrency prices. 

Credit: CCData

Coinbase did not immediately respond to a request for comment.

The research  said that Coinbase gained market share in the most recent quarter despite a fall in its spot trading volume as a result of regulators’ increasing focus on Binance, a cryptocurrency exchange. 

Credit: Bloomberg

The spot market share of cryptocurrency exchange Binance decreased  on October 6 for the seventh consecutive month. 

Some cryptocurrency trading platforms have shown success in terms of website traffic despite declining trade volumes and market shares for crypto exchanges.  

Data from September 18 showed that exchanges like OKX, HTX (previously Huobi), Gate.io, CoinW, XT.com, and Bitmart had noticeable gains in site traffic year-to-date (YTD), whereas Binance and Coinbase witnessed dramatic losses in traffic.

The data shows that HTX’s website traffic increased by 200%, while Gate.io and CoinW experienced traffic increases of 143% and 66% YTD, respectively.  

According to Mizuho Securities , Coinbase’s revenue will be 10% below expectations, and its trading volume will be less than the $86 billion consensus projection.

Analyst Ryan Coyne asserted  that the company, which has an underperform rating on Coinbase, decreased its projection for trade volume to $72 billion on October 4. It also doesn’t anticipate the current fourth quarter to be much better. 

US Crypto Users Feeling Defeated –  Is This a Victory for DEXs?

Outside of the US, there is regulatory clarity. Officials worry that the United States has descended into regulatory limbo while other nations, like the European Union and the United Kingdom, have pushed ahead with planned legal frameworks for digital assets that crypto industry leaders are playing up. 

While the American crypto industry may currently be issuing empty threats, if regulators in America do not go through with deliberate regulation, there may be a real problem. Numerous companies will be forced to try a different mode of operation if the SEC stays on its current course. 

Uniswap has had higher trading volumes  over the past three months than Coinbase, showing strong trading activity in August of this year, with a total trading volume of more than $1.8 billion. This high volume of trade activity highlights the platform’s importance within the ecosystem of decentralized finance (DeFi). 

Brian Armstrong, the chief executive of Coinbase, stated on social media in April that the exchange also employed Uniswap to carry out part of its consumer services.  

Due to the US regulatory crackdown, there is a considerable probability that all US centralized exchanges are likely to lose to decentralized exchanges (or to overseas exchanges). Instead of a sudden change, this is probably a background tendency that moves slowly over time. 

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