Institutional Investors contribute most to Coinbase’s trading volume, but retail investors bring in higher revenue

02/25/2023 07:32 • Metaverse Matters • 144 views

According to reports, Twitter user Sovereign Inn said that according to its analysis of the latest financial report of Coinbase, institutional investors contributed 86% of the trading volume ($125 billion) but only contributed 4% of the revenue ($13.4 million) in the fourth quarter, while retail investors contributed 14% of the trading volume ($20 billion) but only contributed 96% of the revenue ($308.8 million). The commission for retail transactions is about 0.75%, and the commission for institutional investors is about 0.5%.

Analysis: Coinbase Q4 retail investors contributed 14% of the trading volume, but contributed 96% of the revenue

Interpret the above information:

The latest financial report of Coinbase, one of the largest cryptocurrency exchanges in the world, shows that institutional investors contributed significantly to the exchange’s trading volume in the fourth quarter. Sovereign Inn, a Twitter user who analyzed the report, found that institutional investors accounted for 86% of the trading volume, or $125 billion. In contrast, retail investors only contributed 14% of the trading volume or $20 billion.

However, despite the disproportionate share of trading volume, institutional investors only contributed 4% of Coinbase’s revenue in the same period. The revenue from institutional investors was only $13.4 million, while revenue from retail investors was $308.8 million, which accounted for 96% of the total revenue generated.

One explanation for this phenomenon could be the difference in commissions paid by retail and institutional investors. The commission for retail transactions on Coinbase is around 0.75%, while the commission for institutional investors is around 0.5%. This means that retail investors, who are more likely to trade frequently with smaller trades, end up paying more in commissions than institutional investors who make larger trades less frequently.

Another possible explanation for the disparity in revenue contribution between retail and institutional investors is that retail investors are more likely to invest in a wider range of cryptocurrencies than institutional investors, who tend to focus on the most established ones. As a result, retail investors generate more revenue for Coinbase by trading in a diverse range of cryptocurrencies.

In conclusion, while institutional investors contribute the majority of trading volume on Coinbase, retail investors generate higher revenue for the exchange. This phenomenon could be attributed to the difference in commissions paid by both types of investors and the diversity of cryptocurrencies traded by retail investors. As cryptocurrency becomes more mainstream and institutional investors continue to show an interest in digital assets, the contribution of institutional investors to Coinbase’s revenue may increase in the future.

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