As more individuals utilize Bitcoin (BTC), and other cryptocurrencies, Coinbase (NASDAQ: COIN) has recorded increased user growth in recent years. Although the crypto sector is now in a bear market, which may be affecting investor interest in digital asset trading more generally, Coinbase’s user base seems to be unaffected by prolonged down markets.
In particular, data acquired and calculated by Finbold indicates that Coinbase has added 19 million verified users globally between December 31, 2021, and September 30, 2022, representing a growth of about 21.35%. The figure translates to adding at least two million verified users monthly in 2022.
At the end of the first quarter, Coinbase had 98 million users representing an addition of nine million verified users from the 2021 Q4 figure of 89 million. In Q2, the users stood at 103 million, while Q3 registered the exchange’s highest number of verified users at 108 million.
Elsewhere, Coinbase’s global market share hit 3% as of December 6, 2022, among spot trading crypto exchanges, while in November, the share was 2.6%. The share has been rising steadily since September. Coinbase’s lowest yearly global market share was recorded in July at 1.6%. The exchange’s highest market share was witnessed in November 2021 at 4.2% at the height of the crypto bull run.
How Coinbase managed to add more verified users despite market volatility
Although Coinbase is currently operating in an environment of market sell-offs, the exchange’s ability to record a steady growth of verified users can be attributed to several factors like the trading platform’s business model. Indeed, the exchange is touted to have an innovative marketing strategy that entails factors like referral programs and unique features such as enabling users to send crypto as gifts.
The user growth also highlights the trading platform’s popularity in the United States, with the exchange boosting of a secure platform with a commitment of adhering to relevant crypto compliance laws translating to trust among investors.
Coinbase appeals to beginners and advanced crypto investors exposed to a wide range of digital assets and educational resources enabling users to learn more about crypto while providing incentives. Coinbase’s partnership with leading global brands is also at the center of the growth. In this line, the exchange recently partnered with Google to drive Web3 innovation while enabling the use of the crypto exchange to accept cryptocurrency payments for cloud services.
Navigating the bear market
It is worth noting that the bear market has demotivated most cryptocurrency traders who are staying on the sidelines, waiting for market conditions to improve. Indeed the situation has also taken a toll on Coinbase’s business, with the company’s stock plunging to historic lows.
Overall, Coinbase stock has suffered from the general sell-off in equities markets. The market downturn has also forced Coinbase to readjust its business model by opting for layoffs and hiring freezes.
At the same time, the exchange has adopted several measures to entice users who are likely demotivated by the prevailing condition. For instance, the exchange allows customers to seamlessly switch from Tether (USDT) to USD Coin (USDC) with zero fees.
With the number of verified users, Coinbase appears to be navigating the tight regulatory space impressively, especially with peers coming under scrutiny for vices such as money laundering and poor management. The growth comes despite Coinbase acknowledging that it honors law enforcement requests to provide user information to aid investigations.
Impact of regulations on Coinbase user growth
At the same, the regulatory rope is likely to tighten on exchanges such as Coinbase following the FTX debacle that saw millions of users lose their funds. Notably, the collapse has resulted in regulators focusing on managing centralized exchanges as users opt to withdraw their assets from exchanges for safety purposes.
Interestingly, there was a dispute between Coinbase and the Securities Exchange Commission (SEC) after the regulator’s chair Gary Gensler insinuated that the exchange has not registered with the agency despite hosting several securities.
Notably, the SEC Coinbase tussle has been due to the uncertainty regarding the regulation of cryptocurrencies in the U.S., especially on whether cryptocurrencies and stablecoins are legally defined as securities. Therefore, the outcome of the tussle will likely have an impact on the exchange user base.
In the future, the number of Coinbase verified users would likely grow, with the exchange setting sights on expanding into the European market. Already the exchange views Europe as an ideal marketplace considering the region has enacted the Markets in Crypto Assets Regulation (MiCA). The laws mean Coinbase will operate in a well-defined regulated environment if it ventures into the European market.