After a turbulent beginning The exchange is now beginning to enter the US market
The largest publicly traded cryptocurrency trading platform across the United States, Coinbase has become the norm. However, as things get difficult in the crypto market Coinbase seems to be struggling to keep its hands clean which makes it more open to rivals.
The stock price of Coinbase is down by 80percent from the point at which it was at the beginning of the year. Additionally, it has recently was in the news for having to lay off one-fifth staff. Coinbase posted losses of $430 million during its first quarter in 2022. Its results were below Wall Street analysts’ expectations. The volume of trading and the amount of monthly users who transacted declined from the Q4 of last yearwhich is bad news for a firm which relies heavily on transaction fees to generate its income.
The exchange ascended its skis faster than Coinbase would have anticipated as evidenced by its decision to cancel job offers earlier this month from applicants who had accepted the offers. The competition, however, are waiting to get their chance to gain a foothold on their share of the U.S. market. As Coinbase is spotting a moment of decline, the two biggest cryptocurrency exchanges in terms of size (Coinbase is third in the world) -Binance and FTX Binance and FTX are hoping to capitalize on their opportunities in the United States.
The three giants of crypto have their own established customer base and are attempting to take the market share of each other. Retail investors account for about 90% of the Coinbase transactions revenue, as revealed in its most recent quarterly report. FTX is, however it has an established institution-based trading business that is anchored by its chief executive and founder Sam Bankman-Fried’s experience as a quant hedge fund. Also Read
SBF as he’s referred to in the crypto community has been doing everything to attract retail customers which includes the introduction of no-cost U.S. stock trading in May and attempting to make FTX into an all-in-one solution for consumer’s requirements. If Coinbase rose to the top spot, which it has done in the. 3 spot, fueled almost entirely with U.S. retail investors, it’s decline is an excellent opportunity for institutions-focused exchanges to woo its customers and increase their own trading volume.
It is logical, therefore it is not surprising that Binance is aiming to attract new investors from the retail market however, the world’s largest exchange is still somewhat of a hindrance in the battle for its share of the U.S. market as it fights FTX to attract customers. Its Binance.US division had spots trading volume below $300 million by July 12. This is a small one-third of the way down when compared to its global business that had a total of $10 billion during the same period . That’s around seven times the those at FTX or Coinbase.
Today 70% of the trading activity on Binance.US The American affiliate of Binance.com, the world’s largest exchange is generated by institutional customers Binance.US’s Chief Executive Officer Brian Shroder told TechCrunch in an interview. But retail investors still generate more profit all-in, largely because of the high discounts Binance.US provides to its largest volume customers, he explained.
Binance is using a different strategy in comparison to FTX in attracting U.S. retail investors, with its focus on its main strength in the field of crypto.
“Some exchanges would like to return to trading stocks and target the market. It’s not the right or wrong method. We’re a web3-only business. We’re not going to stop and we’re moving ahead. We’re looking to develop additional web3 instruments,” Binance founder Changpeng Zhao spoke to Decrypt in an interview earlier this week.
The exchange has also adopted more of a subtle approach to it comes to marketing within the U.S. In contrast to other competitors like Coinbase, FTX and Crypto.com were spending billions of dollars for Super Bowl ads during the cryptocurrency bull market, Binance.US stayed relatively quiet.
Under Shroder’s leadership, Binance.US seems to be shifting its reputation from one that was plagued by rapid turnover of management and ongoing battles with regulators, and is advancing in its quest to gain with investors in the U.S. retail investor. From the perspective of customers the strategy is unquestionably attractive — it is able to compete with competitors by offering lower prices.
Coinbase’s fees are notoriously expensive with up to 3.99 percent for specific spot trades, compared to FTX.US which is charged up to 0.20 percent. Binance.US is, however, has confirmed its commitment to keeping costs as low as possible for its customers last month , when it introduced fees-free bitcoin spot trading to all customers, and claimed that it’s only the second U.S. crypto exchange to offer this service, but it’s important to note that exchanges earn profits from spreads on trades , even though they don’t charge an upfront cost. The company also launched the staking product in March which it claims offers the highest APY rates in comparison to competitors. It also stated that it would soon be adding free trading for other currencies in the near future.
“On the cost side, it is unquestionable that we are the lowest-cost provider in this space,” Shroder declared.
When asked the way Binance.US can provide above-market rates from its staking service, Shroder’s reply to the question was “My guess is that when you look at the other firms having much lower APYs, it’s just that they are taking that themselves, and we are passing it on to the customer.”
Naturally, investors are drawn to lower costs and better returns. This gives the deep-pocketed Binance the advantage over Coinbase in that it is able to be able to afford to lose earnings within the U.S. to attract users in the event that it earns profits other places. This is also true for FTX which offers no-cost equity trading solely because it’s earning profits elsewhere in its business.
Customers have been enthusiastic about Binance.US even though investors at times, appeared more cautious. But, in April was the month that it was successfully able to raise its first capital from investors in a round of $200 million which valued the company to $4.5 billion. This was a significant initial step in the path towards an IPO — a significant milestone Shroder that he anticipates occurring within the next two to three years.
With the money and an extension of the round Shroder claims will be announced in the near future The company is in a good position to handle a volatile market. The company is currently seeking to hire for new positions to increase the current workforce of 400.
“What I experienced at Uber, I’m living through again”
Despite the recent efforts of Binance to expand its presence in their efforts to enter the U.S. market, its complicated relationship with local regulators can make it easy to overlook. The firm is currently being investigated through The U.S. Commodities and Futures Trading Commission in connection with allegations that it was involved in manipulation of markets. There is a possibility that the exchange engaged in market manipulation. U.S. Justice Department and IRS are also currently examining whether the exchange was involved in tax and money laundering fraud.
To give background, Binance.US launched in 2019 as a separate entity that licensed its brand and technology to Binance itself. Zhao is believed to have split the division as a way for a win over U.S. officials who resisted to approve an international exchange.
Zhao retains a significant power over the U.S. exchange today as an important shareholder, but Zhao told Decrypt last week Binance “is no longer top-down driven” by Zhao. The New York Times reported in August of last year that Zhao owned 90 percent of Binance.US shares.
Zhao’s stake in the company, according to the Times the newspaper, was an issue for investors from outside as the former Binance.US Chief Executive Brian Brooks tried to raise an investment funding round in the firm in an approach to the eventual IPO. Brooks was forced to leave the company only three months after he took the top position and possibly because the deal was not successful.
Brooks doesn’t have to be the only executive at Binance.US who’s departed unexpectedly. Binance.US’s founder and Chief Executive Officer, Catherine Coley, left the company so quietly in May that unconfirmed rumors started to circulate about her whereabouts. In October of last year, when Shroder assumed the role of Binance.US’s CEO as the company’s next CEO following the departure of Coley, Binance.US’s founding CFO Joshua Sroge made his exit. This week, after nearly nine months of seeking the company finally stepped in to fill Sroge’s place, appointing former Acorns director Jasmine Lee as its new CFO permanent.
In addition to the problems within the U.S., Binance has also come under intense regulatory investigation in Japan as well as Europe, the EU, Germany, Thailand and other areas. Shroder, who was the previous leader of Uber’s Asia-Pacific strategies, compared this exchange with the controversial rideshare startup.
“What I experienced at Uber, I’m living through again,” Shroder stated. “When I used to work at Uber there, we were bad boys no. 1. We were the bad guys focusing on the taxi industry , and hurting taxi drivers and stuff similar to that.”
Shroder has a goal to lead Binance.US towards its long-standing goal of becoming a public company and believes it can achieve within the next two to three years. Shroder said Binance.US is capable of continuing to grow even in the face of difficult market conditions and cites the company’s plans to hire employees that were fired by Coinbase and the rival crypto exchange Gemini as proof that the business is better prepared for the future challenges.
“Coinbase and Gemini have a range of services and products they offer, and they’ve got been around for a while. They’ve been around for quite some time. There was historically only trading in spot form up until actually this quarter. Therefore, as we develop more services and products, which we have a very ambitious schedule to achieve and we will require more products and tech experts and operations personnel to manage the new business divisions. With the capital infusion that we’ve just received from our first seed round and we’re using all the money and putting it back into growth” Shroder said.
It’s too early to tell the extent to which Shroder’s plan for change is successful however, he’s determined to alter the perception of Binance.US in the eyes of the public. A major misconceptions that the general public has about Binance.US according to Shroder, is it’s “desire to be a fully compliant and regulated entity,” which Shroder declared to be central to the business since its inception.