Coinbase is a company that deserves special attention in the recent Bitcoin exchange-traded fund (ETF) custody service market. We found that 12 out of 9 companies seeking to issue Bitcoin ETFs chose Coinbase as their custody service provider, which undoubtedly confirms its important position and influence in the market.
However, from the perspective of compliance and market health, this market trend also exposes certain competitive imbalances. Other well-known cryptocurrency custody companies such as BitGo, which compete with Coinbase, seem to be facing shrinking market share.
In the U.S. market, custody services are essential to driving the development of the spot Bitcoin ETF market. The custodian’s responsibility is to ensure the safekeeping of clients’ assets, which is particularly important in the ETF field, which may involve protecting billions of dollars worth of Bitcoin. This includes not only the physical security of assets, but also covers the prevention of cyber attacks and other illegal risks.
Given that Coinbase currently serves as the custodian for multiple Bitcoin ETF proposals, the market has expressed some concerns about this centralization trend. As a result, institutions like Fidelity have chosen to custody the assets themselves, while VanEck has chosen Gemini as its custody partner.
A major driver of this situation is the uncertainty in cryptocurrency regulation in the United States, which has limited the scope of market competition and made the choice of suitable custody service providers relatively limited. But this has also led to the soaring of Coin in the past few days.
Assume that half of all Bitcoin ends up being held by an ETF. When Bitcoin reaches $10, its market cap will be $2 trillion. This means that about $1 trillion of assets are held in custody by $COIN. They charge a 10 basis point fee per month, which equates to $10 billion in profit per month. This alone would equal $TSLA’s profit in the same period in its annualized profit.