Coinbase is the largest publicly traded exchange in the US. The company seems to be fumbling the bag as the markets get more difficult.
The stock price of the company is down 80% from where it started the year, and it recently made headlines for laying off 20% of its staff. Wall Street analysts had expected the company to post a loss in the first quarter. Its trading volumes and number of monthly users were both down from last year's fourth quarter.
The exchange got over its skis quicker than even it could have imagined, as evidenced by the fact that it withdrew job offers from candidates who had already accepted them. Competitors have been waiting for the right time to enter the US market. The two largest exchanges in the world by volume are hoping to take advantage of the weakness in the market.
The three giants are trying to steal each other's market share. According to its latest quarterly filing, retail investors comprise almost all of the revenue. FTX has a strong institutional trading business anchored in the background of its founder and CEO Sam Bankman-Fried.
FTX is trying to become a one-stop shop for retail investors by introducing zero-fee U.S. stock trading in May. If it ascended to the No. 3 spot, its decline presents a valuable opportunity for global, institutionally focused exchanges to lure users and increase trading volumes.
It makes sense that the largest global exchange is trying to get more retail investors in order to compete with FTX for customers. Spot trading volumes were below $300 million. In comparison to its global business, which saw volumes of $10 billion for the same period, this is a drop in the bucket.
70% of trading volume on the American branch of the global exchange comes from institutional customers, according to the CEO. Retail investors bring in more revenue because they offer steep discounts to their highest volume customers.
FTX has a different approach to attracting retail investors in the U.S.
Some exchanges would like to return to stock trading. It is not a wrong or right approach. We are a small company. We're moving forward, not going back. In an interview this week, Chanpeng Zhao said that they want to build more web 3 tools.
When it comes to marketing in the U.S., the exchange is taking a less flashy approach.
Binance.US seems to be reversing its reputation, once marred by rapid management turnover and ongoing regulatory battles, and pulling ahead in the fight to win over the U.S. retail investor. Its strategy is appealing to customers because it undercuts competitors.
Spot trades with a fee of up to 3.99% are more expensive than spot trades with a fee of 0.20%. When it launched fee-free spot trading for all users, it was the first US exchange to do so. It added fee-free trading for more currencies in the future, as well as rolling out a staking product that it claims provides some of the highest rates compared to its competitors.
Shroder said that they are the lowest cost provider in the space.
Shroder believes that other firms are taking that themselves when it comes to providing above- market yields from their staking product.
With investors preferring lower fees and higher returns, the deep-pocketed Binance can afford to sacrifice profits in the U.S. in order to attract users as long as it makes them elsewhere. FTX can offer no-fee equity trading only because it makes money in other parts of its business.
The customers have shown enthusiasm for the company. The company was able to raise its first external funding in April of this year in a $200 million round. Shroder expects the IPO to happen in two to three years.
Shroder says that an extension to the round is coming soon and that the company is well positioned to weather a choppy market. Last month, it was reported that it is hiring for more than 70 new roles.
Binance.US CEO tells employees the company is ‘growing faster than ever’
Despite its recent efforts in the U.S. market, its history with local regulators makes it hard to underestimate. There are allegations that the company engaged in market manipulation. The IRS and the Justice Department are looking into the exchange's activities.
Binance.US is a separate entity that licenses its branding and core technology from its parent company. The division was spun off in order to appeal to regulators in the U.S.
Although he still wields significant influence over the U.S. exchange as a major shareholder, he told Decrypt this week that he no longer drives the company. In August of last year, the New York Times reported that the majority of the shares of the company were held by Zhao.
According to the Times, the ownership stake of Zhao became a sticking point with outside investors when the company was trying to raise a venture round. It's possible that the deal fell through which led to the departure of the company's new leader.
There is more than one top executive who has left unexpectedly. Catherine Coley, the company's founding CEO, left the company quietly in May of last year. In October of last year, Shroder took over the company as its next permanent CEO after Coley. After nine months of searching, the company finally found a new CFO in Jasmine Lee.
In addition to its troubles in the U.S., it has also faced regulatory scrutiny in Japan, the EU, Germany, Thailand and other countries. Shroder said the exchange was similar to the ride-share startup.
Shroder said that he is living through again after his experience at the ride-sharing service. We were the bad boys at the time.
He said that there was an entrepreneurial who had an innovative approach to expanding technology that had never been considered by regulators. The regulators had to catch up to the technology in order to support that.
Shroder believes that it will achieve its longstanding goal of going public in the next couple of years. He said that his company is better positioned for the challenges ahead due to the fact that he plans to hire some employees who were let go by the two competitors.
They have a lot of products and services out there, and they have been out there for a long time. Spot trading has been up until this quarter. We have a very aggressive plan to do as we add more products. More operations people are required to run the new business units. Shroder said that with the capital injection from the first seed round, they would plow it back into growth.
Time will tell if Shroder's plan will work, but he is determined to change the narrative in the public eye Shroder said that one of the biggest myths about the company is that it wants to be compliant and regulated.
If you don't tell your own story, your story is being told by your competitors or your story is being told based on your click rate Shroder thinks that negative headlines create a misperception in the market that is not based on reality.
Binance.US hires former Acorns, PayPal exec Jasmine Lee as CFO
All Rights Reserved © 2024
