On January 13, Coinbase announced in a blog post that it was acquiring FairX, a crypto derivatives exchange. FairX is said to be regulated by the U.S. Commodity Futures Commission (CFTC).
Coinbase said the acquisition is a key step in its offering of crypto derivatives to U.S. retail and institutional clients. After the acquisition, Coinbase said it plans to first provide derivatives trading capabilities to FairX’s existing partner ecosystem, and then leverage FairX’s infrastructure to provide crypto derivatives to all Coinbase customers in the United States. It is reported that the acquisition is expected to be completed in the first fiscal quarter of this year.
In fact, when it comes to compliance, Coinbase has made a lot of efforts. It also previously received approval for cryptocurrency custody operations in Germany. Brian Armstrong, CEO of Coinbase, said that we plan to list all legal and viable cryptocurrency assets.
Multiple Coinbase businesses continue to develop
In addition, the financial report shows that Coinbase’s total revenue in the third quarter was $1.31 billion, a decrease of 41.2% from the previous quarter ($2.23 billion). The lack of results was mainly due to seasonal fluctuations in Bitcoin trading. The currency structure was further optimized, customer stickiness continued to increase, institutional coverage continued to increase, and a number of businesses continued to develop. Coinbase Cloud, Coinbase Wallet, and Coinbase NFT proceeded in an orderly manner, and the compliance layout continued to improve.
It is worth mentioning that on the first day of Coinbase listing, ArkInvest founder and CEO Cathie Wood bought nearly $250 million in Coinbase stock. Currently, Coinbase is the fifth-largest holding in the Ark Innovation ETF (ARKK), with a weighting of about 5.3%. It is the second largest holding of the Ark Fintech Innovation ETF (ARKF), with a weight of nearly 9.1%.
As a leading cryptocurrency exchange, Coinbase’s product growth plans make it an attractive long-term investment, according to an analyst and research associate at investment management firm Ark Invest. Coinbase accounted for about 10% of spot trading volume in the crypto market in the past 2021. In the long run, Coinbase will continue to capture the trading volume market share, which is estimated to accelerate and innovate in real products. This will increase the number and stickiness of users on the platform.
The competition around cryptocurrency app stores is unfolding, Chainalysis chief economist Philip Gradwe said in an email. An important lesson of Web 2.0 is that consumers love platforms, and I don’t think Web 3.0 will change that. No cryptocurrency platform currently has customer relationships and aggregates suppliers. I expect many companies will be racing to build this platform by 2022, with Coinbase being the leader as it integrates Decentralized Finance (DeFi) and NFTs.
Coinbase continues to grow
Separately, Bank of America has upgraded Coinbase Global Inc to buy from neutral, and analyst Jason Kupferberg said Coinbase revenue is becoming diversified, a trend that could accelerate in 2022 and beyond. In addition, he predicts that Coinbase subscription and services revenue will account for 16% of total revenue by 2023. Factors driving this trend may include blockchain rewards, user learning, NFT trading platforms and DeFi products that have not yet officially launched.
Sensor Tower data suggests that with Coinbase app downloads growing and average revenue per user (ARPU) accelerating, there is potential for a significant boost in the company’s fourth-quarter expectations. Analysts raised the company’s fourth-quarter ARPU forecast to $45 from $30. Net revenue forecast was raised to $1.44 billion from $958 million.
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