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Cryptocurrency exchange Coinbase is cutting its fees to attract more wholesalers and boost its underperforming institutional business.

The US group said on Thursday it would waive fees for 60 days for customers who want to trade cryptocurrencies on its professional market if they traded more than $500,000 per month on a rival exchange. Fee-free trading is typically only available to traders who manage more than $250 million.

Coinbase’s attempt to boost its institutional business came just three weeks after U.S. regulators approved the first Bitcoin exchange-traded funds, a move expected to help reshape trading in the sector in the long term. Crypto advocates hope the new funds will open the door for more asset managers to purchase funds that invest directly in Bitcoin.

“The biggest [crypto exchanges] There is a lack of adoption, and the main reason institutions get in is the fact that they can access Bitcoin through an ETF,” said Christopher Perkins, president of crypto investment firm Coinfund and former head of OTC clearing at Citigroup. “Fees will come down as volumes increase and that is just the natural maturation of markets, particularly spot markets,” he added.

Coinbase was one of the beneficiaries of the ETF approvals, as it is the primary custodian for the Bitcoin trusts that purchase the tokens for their funds.

However, analysts at Bank of America warned this month that returns from asset custody could be “quite low” as it faces pressure from Wall Street names such as BlackRock and Fidelity. “These ETFs could also represent a form of competition for traditional crypto exchanges such as Coinbase,” it said.

Coinbase’s institutional business accounts for just 5 percent of the Nasdaq-listed company’s transaction revenue and fell 30 percent year-over-year to $14.1 million in the third quarter.

The company also faces increasing competition from offshore rivals such as OKX and Huobi. Coinbase’s share of the spot cryptocurrency market has remained unchanged at 6 percent since the beginning of 2023, while OKX’s share has increased from 4 to 7 percent and Huobi’s has quadrupled to almost 4 percent.

Similar strategies have been adopted in the past by Coinbase’s competitors, including Binance. The world’s largest crypto exchange expanded its free trading program in September 2022, capturing more than half of the spot market for cryptocurrencies.

When the program ended, it began to lose market share and the Commodity Futures Trading Commission accused it of circumventing federal law.

“We know that fees are one of the most important factors when it comes to choosing and trading on a crypto exchange,” Coinbase said in a blog post.

Source : www.ft.com

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