Major cryptocurrency exchanges are evolving into broader financial services platforms, investing more in new products to grow and diversify as increasing traditional trading revenues becomes more challenging.
During the second quarter, three of the largest listed crypto exchanges—Coinbase, Bullish, and Gemini—recorded quarter-on-quarter drops in trading revenue as a persistent bear market impacted activity. The gap between trading and non-trading revenues at these exchanges narrowed significantly during the period, prompting firms to adjust their business strategies.
New Products and Evolving Rewards
To reduce their reliance on market fluctuations and trading activity, platforms are expanding into alternative offerings such as stablecoin products and prediction markets.
- Coinbase: The company cut its expenses, including a 14% staff reduction in May and a $100 million cut to its full-year cost guidance, while allowing its USD Coin (USDC) rewards to grow. Average USDC held in Coinbase products jumped 44% year-over-year to $20 billion.
- Gemini: The exchange increased its focus on prediction markets by tripling the number of market makers and paying rebates to those firms alongside rewards to users, resulting in nearly doubled bets for the quarter.
- Bullish: The institution-focused exchange introduced a new rewards program to support falling trading revenue, while also taking steps to expand its tokenized securities business.
Fee Economics and Future Outlook
Despite falling total revenues and trading volumes, some platforms reported improvements in fee economics. Gemini confirmed that fee economics continued to improve across both retail and institutional segments despite a 27% quarterly drop in total exchange revenue. Meanwhile, Coinbase reported a 22% drop in transaction revenue alongside a 35% fall in spot volume, though derivatives volume climbed 3% year-over-year.
Looking ahead, a potential return of a bull market could revive trading revenues while intensifying competition over fees and users. As crypto platforms and traditional finance continue to blend, exchanges are expected to maintain a focus on rewards and incentives for newer products to lessen their dependence on volatile trading cycles.
