Purpose of Report
- The Coinbase FY investor report shows the breakdown and insights into Coinbase's operations for the full year of 2021. The purpose of this report is to understand what their figures are and use them as a benchmark to compare other crypto exchanges, then make recommendations based on them.
Data
- Data Point 1: Retail vs Institutional Trading Volume
- Data Point 2: Retail vs Institutional Transaction Net Revenue
- Data Point 3: Active Users to Total Verified Users
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Data Point 1: Retail vs Institutional Trading Volume
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Data Point 2: Retail vs Institutional Net Revenue
Data Point 3: Active Users to Total Verified Users
Insights & Recommendations
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From Data Point 1 & 2, you'll see that 67% of Coinbase's trading volume came from Institutional investors, while all of their typical active users only accounted for 33% of their volumes. That ratio would be around 0.1% of their user base accounting for 67% of their total volumes. But what is more interesting is that although 67% of their trading volumes came from institutions, only 5% of their revenue came from these institutions while 95% of their transaction revenue came from retail users. This means that the spreads/fees per trade they charge their institutions are approximately 40 times less than what they charge retail users.
- Recommendation:
- First, if crypto exchanges want to grow their trading volume they should invest more heavily into an institutional investor business arm, and consider hiring a small sales force, to acquire these whales.
- Secondly, in order to continue to keep these institutions as traders, crypto exchanges should keep their prices significantly lower than our retail users.
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From Data Point 3, Coinbase reported having a verified user base of 89 million and an average of 11.4 million MAUs in Q4 of 2021. This means they have a 12.81% active user/verified user ratio during bull markets.
- Recommendation:
- We can apply this 12.81% as a benchmark to determine how efficient their activation & retention rates are for crypto exchanges. If this number is at 20% - 30%, then we’ll know that the major optimisation area is at the acquisition & KYC verification segments of the funnel.