The largest cryptocurrency exchange in the US, Coinbase, has announced that it will be focusing more of its attention on staking. Staking means keeping a cryptocurrency, like bitcoin or ether, so you can verify transactions on the network and earn interest.
Because of the ongoing “crypto winter” and fewer retail and institutional investors trading digital assets, Coinbase’s trade volume dropped from $462 billion in the same quarter last year to $217 billion this year. This is down nearly 50% from the same quarter last year.
In its letter to shareholders, Coinbase said that its staking product was an “early triumph” for the company and that it wants to be the best service for staking crypto. Coinbase currently offers staking for Ethereum, Algorand, Cosmos, and Tezos, and added Cardano in March and Solana in June. The exchange also started letting institutional customers stake Ethereum at the beginning of August, and it plans to keep adding more services for both retail and institutional customers.
Even though the number of trades has gone down, Coinbase CEO Brian Armstrong said on the company’s most recent earnings call that the company is not just focused on making money. “We must discern between what we can control and what we cannot.” Coinbase CFO Alesia Haas added that while the number of monthly transactional customers has declined, it is still up 200,000 from the same quarter last year.
Ethereum, the second-largest cryptocurrency by market value, is getting ready to switch from proof-of-work to proof-of-stake transaction validation, which has been a long time coming. In its shareholder letter, Coinbase said that 67% of its monthly transactional customers used non-investment products like staking in the second fiscal quarter and that “across all assets we serve, Coinbase saw more native units staked in Q2 than in Q1.”
Overall, it seems like Coinbase’s bet on staking is a smart way to keep users on the platform and keep making money even when the cryptocurrency market is down. As the most popular service for staking cryptocurrency, Coinbase is in a good position to take advantage of the growing trend of staking as more investors switch from traders to “hodlers” when the market goes down.
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