Crypto Trading Revenue May Double in 2018, Research Suggests

Revenue generated by cryptocurrency exchanges could soar to $4 billion by the year end, Bernstein analysts estimate.

Despite the recent market downtrend, income generated by cryptocurrency exchanges could more than double and hit $4 billion in 2018, new research from the investment management firm Sanford C. Bernstein & Co. suggests.

The paper, titled ‘Crypto Trading — the Next Big Thing is Here?’ and first reported by Bloomberg on Friday, found that cryptocurrency exchanges brought in an estimated $1.8 billion in income from transaction fees in 2017. While representing just about 8% of the income seen on traditional exchanges, the figure surpasses those of all other financial assets apart from global cash equities.

“As the crypto-asset class seasons and institutional demand builds, there are a plethora of opportunities for traditional firms,”

the analysts wrote.

The revenue growth could be attributed to the recent crypto price swings, with investors trying to recoup losses as the market has plunged more than 60% since the beginning of the year. Bitcoin (BTC) reached a record high of nearly $20,000 in December 2017 only to fall to a 2018 low of $5,800. Currently, the original cryptocurrency is hovering around $6,500.

Bernstein noted, however, that the recent price volatility, coupled with the ongoing regulatory uncertainty, have prevented the virtual currency sector from becoming more mainstream. While a few big names such as Goldman Sachs, JPMorgan, and Chase have tested the waters when it comes to cryptocurrencies, most traditional financial institutions remain cautious about the nascent business.

Coinbase nearing “unassailable competitive position”

Wall Street’s hesitation over cryptocurrencies could give Coinbase an “unassailable competitive position,” the Bernstein analysts stated. According to their estimates, the San Francisco-based digital assets exchange currently accounts for a whopping 50% of the transaction revenue pool.

Speaking about the company’s growth, Coinbase CEO Brian Armstrong said in an interview with Bloomberg last week:

“This technology is going through a series of bubbles and corrections, […] we have been through four or five of them, where Bitcoin made a big run up in price […] and corrected back 60-70%. Each time it does that it’s at a new plateau, and it’s matched the growth of the company. […] In 2012-13, when we started, we had maybe 500 people a day signing-up and after the next bubble and correction we had 5,000 people a day and now it’s more like 50,000.”