Coinbase started with an idea to build the crypto economy easier to use and transparent. It began in 2012 and is now one of the market leaders in crypto investment. Initially, Coinbase started with only trading and transferring Bitcoins, but sooner the platform also expanded in, Ethereum, Dogecoin, Litecoin, and around 50+ tradable cryptos. As a result, more than 68 million+ people have put their trust in Coinbase and invested through the platform. Here, we’ll know How Does Coinbase Make Money?
A US-based platform that provided a more straightforward way to trade in cryptocurrencies took a long journey to reach a point where it is now. The main question is of how does Coinbase Make Money? For the answer, we need to start looking at the Business Model of Coinbase. The model is similar to the primary stock market platform. Coinbase platform allows retailers and institutional individuals to trade in cryptocurrencies and avail themselves of the benefits like buy, sell and store the crypto in a safe platform.
The basic and the foremost earning to the Coinbase is a brokerage, which customers pay for buying and selling the cryptos; secondly, wallet services which are free-of-charge facilities, Coinbase cards, and Stalking Services. The commission levied on the facilities charge differently for different things. Even, the company’s quarterly traded volumes lie around 462 Billion dollars, but even then, the company has never been hacked or faced a blackout of the platform. It made people build their trust in the company. Apart from these services of Coinbase, the membership of Coinbase Pro provided seamless charts and a better trading experience, with a separate fee. But, it was also evident that the cost of using the Coinbase platform is comparatively higher than its competitors. Still, people tend to overlook these, as the ease of using the medium is the primary facility any trader looks at.
Money Making Business Model
Products of Coinbase
Coinbase has diversified products, which are easy to use and safe, has attracted its customers ever since.
The Coinbase products, on which revenues made:
- Coinbase Pro
- Wallet Services
- Coinbase Cards
- Staking Services
- Interest On Cash
- Coinbase Custody
As knowledge of the products will let us help to learn how the revenues at Coinbase get generated?
Coinbase Pro is a premium service offered to elite customers after the subscription of the platform. The primary Coinbase platform adds at occurring it whensettlesMoreover. The features like more accessible fee structure and brokerages fees can be around (0% to 0.5% per trade), more trading options are available, and the charts used for technical analysis user friendly. Coinbase Pro also gives its customer an edge over advanced charting features. Coinbase operates with high fees on bank account handling, wallet handling, crypto conversions, trades, purchases, and Coinbase fees. The Coinbase Pro version charges an introductory price and makes the charges straightforward. The most important thing to any investor is their money. Coinbase Pro provides a secure platform and has Insurance protection of the assets in the wallets of around $250,000, but the case is when only hacking takes place. The services don’t end here; they also provide a customer base service and get on the board hassle-free.
Coinbase also provides the service of storing all the crypto and NFT in a single wallet. Moreover, it is not mandatory to have a Coinbase account for this purpose, which has led the customers to use the product. Therefore, if the transactions are taking place between the Coinbase wallets, there would not be any charges. But, if another wallet comes into the picture, network fees will gets charged.
Coinbase cards are a VISA-type debit/credit card facility provided by Coinbase. The idea behind cryptocurrency credit cards was to purchase everyday items and groceries with cryptocurrencies. Paysafe Financial Services Limited issues the card. How cool is using crypto cards looks. Owning a car can be pretty expensive. Let’s look at the breakdown of the charges:
|Coinbase Cards Fees||Coinbase Cards Amount|
|Insurance Fees||~ EUR 4.95|
|Straight forward Card Commission||0.20% – Domestic Purchase3.00% – International Purchase|
ItoccurFurthermore, the is one of the most critical revenue-generating services that Coinbase provides.
Maybe staking can be a little complicated to many investors and traders, as it is not their area of expertise. But, Coinbase provides rewards for holding cryptocurrencies with the staking services feature. Any customer can avail of this feature. The basic charge that it takes up is 25% commission from Coinbase.
Interest On Cash
Coinbase also uses its cash in the user accounts to give loans to not only retailers but also the Institutions as well. And, as any other bank does, they take an interest in the offered loans. The cryptocurrency wallet holding gets treated as collateral, and based on the holdings, the loan gets approved. The basic limit set to get a loan is 30% of the Coinbase wallet balance. The interest that the borrower has to pay is around an 8% annual percentage rate.
Custody is again a Coinbase feature, which helps the customers hold their dematerialized securities on their behalf by the company itself but is only available to the customers who deposit $1million in the wallet. This feature helps Coinbase generate revenue in a good number. A direct fee of $10,000 deducts to deposit a million dollars. In addition, there is one more charge; a custody fee of 50 points also gets charged annually, which makes up a significant amount overall.
We have briefly talked about a few money-generating services for Coinbase. Though every service provides its customers one of the best services, the charging/fee system makes money for Coinbase.
Charges Based on Maker and Taker Fee Model
Coinbase charges based on maker and taker fees. The system is simple and easily understandable. When an Immediate Market undertakes the ongoing market prices as tradable prices, a charge of 0.04% to 0.50% levy under the case.
Whereas, when we put a limit order, an order whose price fix by the trader and initiates the trades when and only the prices criteria fulfills, a charge of 0% to 0.50% levy.
The Listing Day for Coinbase
The company, from its records, made it very clear that they are the leading services in cryptocurrencies. The above-listed services not only made them secure, but they were also making a satisfied customer base. On 14th April 2021, Coinbase went public with the symbol: COIN and list on the Nasdaq Exchange. The IPO bidding price settles at $250, and Coinbase made a debut of $381, giving around 52% listing gain, and right away shoot up to $429.54. It made Coinbase more valuable. As more and more traders started crypto trading, the valuation will keep on increasing.
Are People Switching Towards Cryptos and letting Coinbase Earn More?
Around 2017, a sudden boom started about cryptocurrencies and their highly volatile price actions. A lot of people got attracted to it, and the first platform that everyone noticed was Coinbase. Coinbase surpassed various of its competitors and added around 30 million users around 2019-2020. And as the customer base of Coinbase Keeps increasing, Coinbase will make money.
Add On Services Offered by Coinbase
Apart from this, Coinbase, in 2018, also started Coinbase Ventures, whose only sole purpose was to finance early companies or start-ups using blockchain and cryptocurrency. It was the idea behind which, though money-making was never an option, the company may not be monetarily but gets a good branding image in the marketplace. The platform of Coinbase is not only desktop-based but also mobile application-based too, which makes it much more versatile.
Is the competition making Coinbase Slow?
Various competitors in the market try very hard to reach the first position. Few of the competitors include Blockchain, Binance, Zeno, Gemini, and many more. But not only Coinbase is an older company in the market, but they have also developed the platform on a timely basis. Moreover, the company itself quoted a revenue of $1.8 billion in the first quarter of 2021. It is proof that the money-making process developed by the company is very versatile.
Coinbase has enormous services that it can offer to the customer. Besides the benefits, the hard work they are doing to keep the platform away from hackers is one of the satisfaction points. The company has developed a business model, making cryptocurrency the center eye and made the castle around them. The earning model is dependent wholly on their best services with good customer support. The charges may be higher than any of the current ongoing competitors, but Coinbase successfully made a good brand image.
Frequently Asked Questions
- Apart from the mentioned charges, Do Coinbase also have some hidden charges?
No, apart from the said charges, there is no hidden cost.
- Do I get benefitted after availing of any of the services? Yes, Coinbase has various products, including Coinbase Pro/Prime, Wallet, Credit/Debit cards, Staking Service, Interest on cash, and Custody. Every product comes up with its benefits.