Coinbase’s Market Share Losses Accelerate as Competition Eats Its Dominance

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appears to be losing market share at a rapid rate, adding to other pressures facing the cryptocurrency exchange, according to new research.

Analysis shows that Coinbase’s (ticker: COIN) share of traded volume among prominent crypto exchanges is falling rapidly, a team led by Dan Dolev at Mizuho Securities said in a report on Tuesday.

Coinbase captured 11% of trading volume in February among competitors like Binance, Crypto.com, FTX and Kraken, Mizuho found, but that fell to 10% in March and 8% in April.

“The rapid rise of competing exchanges such as Crypto.com and others has made us increasingly concerned about looming retail price pressure and the long-term sustainability of Coinbase’s business model,” Dolev’s team said.

Coinbase could have lost even more market share had the group not added so many new tokens in Q4, they added. Nearly 40% of the 95 new cryptocurrencies added to the exchange in 2021 came in the last three months of the year.

The company faces an uphill battle with competitors flush with cash and ready to spend.

Dolev pointed to Crypto.com, which recently started trading in the US but already has volumes on par with Coinbase. The group has splurged on a major marketing campaign that has included Super Bowl ads and the purchase of the naming rights to the LA Lakers’ home stadium, formerly the Staples Center and now the Crypto.com Arena.

“We are concerned that increased competition will only increase the need to further drive marketing spend, which we believe will likely continue to affect [Coinbase’s profit] beyond 2022,” Mizuho’s team said.

Competitive pressures arise as Coinbase already faces headwinds from a slowdown in cryptocurrency trading volumes, led by retail investors paying higher fees than institutional clients.

Christopher Brendler, an analyst at investment bank DA Davidson, estimated earlier this month that Coinbase’s volume in the first quarter of 2022 totaled $314 billion, down 40% from the previous quarter and led by a decline in retail. . Brendler’s estimate, based on exchange data, is 20% below the current consensus.

Also, as Barron’s As reported, Coinbase is already spending heavily to build out its non-fungible token (NFT) business at a time when that segment is also slowing down.

“We question the strategic logic of pursuing NFTs…especially as the NFT hype appears to be abating,” Dolev’s team at Mizuho said earlier this month. They estimate that Coinbase may have to spend up to $300 million to launch its NFT platform in 2022, contributing to an overall 130% increase in annual operating expenses.

Mizuho rates Coinbase at Neutral with a price target of $150, which was lowered on Tuesday from $190. The group had a price target for the shares of $220 on April 4.

Coinbase shares rose 1.7% on Tuesday, but have lost 11% in the last five days alone. The stock is down 34% year to date and was last trading around $156.50.

Email Jack Denton at jack.denton@dowjones.com