The launch of Bitcoin exchange-traded funds hasn’t led to a predicted boom in trading volume and prices.
In fact, the ETFs may even be a drag for
Global, according to an analyst.
Since the ETFs launched to much fanfare in January, average daily spot trading volume on Coinbase has fallen to $1.9 billion from $2.5 billion in the 30 days preceding their launch, according to Mizuho analyst Dan Dolev.
The falling volume isn’t a great sign for the trading platform, which in recent years has diversified earning streams but still relies on traders for the bulk of its revenue.
The industry hoped Bitcoin ETFs, which the Securities and Exchange Commission approved on Jan. 10, would reinvigorate retail interest in crypto. But while the funds have received billions in investor money since launch, the impact on trading and prices has been muted.
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On Monday, Bitcoin traded at about $42,650, down about 3.4% year to date, but still up 86% over the past 12 months.
Dolev, who has an Underperform rating on Coinbase, said the ETFs could put downward pressure on Coinbase’s fees.
A Coinbase spokesperson referred a request for comment to prior remarks made by CEO Brian Armstrong and President Emilie Choi.
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In a CNBC interview in January, Armstrong called the ETFs a win-win for the company that would bring new investors into crypto and increase activity around many cryptocurrencies or blockchain activities beyond Bitcoin.
On potential fee cuts, Choi said last November on an earnings call the company had “no current plans to reduce transaction fees because of ETFs.”
So far, the new ETFs, launched by companies including BlackRock and Fidelity, have gathered about $7.3 billion. That has been offset by $5.8 billion in outflows from the
which traded like a closed-end fund before converting into an ETF in January.
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Coinbase is a custodian for most of the new ETFs, but Dolev notes that because of Grayscale’s outflows, Coinbase might even be custodying less Bitcoin assets than it was before the ETF launches.
But it is a bit early to call the ETFs a bust for Coinbase or the rest of the industry. For one, the target market for the ETFs—institutional investors—for the most part likely isn’t even buying the funds yet.
Advisor networks tend to require months of trading and due diligence before adding an ETF to their platform. Big traders also generally want to see assets and volumes reach a level at which they aren’t going to move prices themselves when they dive into any one fund.
Coinbase executives will get their next opportunity to show how the ETFs are affecting their business when the company reports earnings on Feb.15.
Write to Joe Light at joe.light@barrons.com
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Read More: Bitcoin ETFs Are Turning Into a Drag for Coinbase
