Crypto Industry

Crypto Trading Fees a Major Revenue Driver Despite Market Decline

Tony Spilotro | August 17, 2018 | 5:30 pm
crypto trader
Crypto

Crypto Trading Fees a Major Revenue Driver Despite Market Decline

Tony Spilotro | August 17, 2018 | 5:30 pm

Top analysts from major money management firm Sanford C. Bernstein & Co. believe that revenue from crypto trading fees will double in 2018, despite declining interest and prices in cryptocurrencies like Bitcoin and Ether.

Bernstein Suggests Crypto Trading is the Next Big Thing

New York-based global asset management firm Sanford C. Bernstein & Co. has released a new report titled “Crypto Trading — the Next Big Thing is Here?” In the report, analysts claim that fees generated from the buying and selling of crypto assets was responsible for as much as 8 percent of what established, traditional exchanges generate in fees, despite the emerging cryptocurrency market being in its infancy.

The total fees amassed at the largest exchanges alone top $1.8 billion in revenue, so it’s no surprise that Wall Street is showing some signs of interest in getting their slice of the pie. Bernstein’s estimates are based on trading fees only and was calculated using daily volume data from CoinMarketCap, CBOE, and other sources.

Lead analyst for Bernstein, Christian Bolu, believes as the crypto asset class matures, additional opportunities including custody and asset management services will be too profitable for traditional firms to ignore.

Big Players Touting Substantial Growth While Loss Leaders Play Catch-Up

As part of Bernstein’s report, the firm estimates that San Francisco-based Coinbase dominates the market with 50% of all transaction revenue. Bolu claims that unless Wall Street soon dips their toes into the space, Coinbase could reach an ““unassailable competitive position.” Coinbase overshot its revenue expectations by over $600 million in 2017 due to bitcoin’s mainstream attention, generating a record $1 billion in revenue for the year.

Another competitor and newcomer to the space is a perfect example of just how profitable cryptocurrency trading can be. Binance, which enjoys some of the highest trading volume among all exchanges, saw an increase quarter over quarter from $7.5 million to $200 million in 2017, and is projecting $1 billion in revenue for 2018.

Other competitors, Robinhood and Square’s Cash app, generate little revenue from their crypto trading products currently, but the decision to keep commissions low is to grow in market share against behemoths like Coinbase and Binance. Square recently expanded its Bitcoin offering to all 50 states across the US, while Robinhood continues to expand and list new assets to remain competitive. 

Traders Profit From Volatility, While Exchanges Profit From Traders

The revenue generated from cryptocurrency trading is largely thanks to the wild volatility and price swings seen in Bitcoin and other crypto asset markets. Bitcoin reached an all-time high of nearly $20,000 in late December 2017, only to fall to a 2018 low of $5800. Investors, having witnessed their substantial gains from 2017 wither away, have been lured to exchanges to try and trade to recoup losses. Meanwhile, exchanges continue to profit from traders regardless of the price a crypto asset is at, and according to Bernstein’s report, show no signs of slowing down.

 

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