Over the past decade, Coinbase has reached millions of cryptocurrency traders and expanded to become the largest cryptocurrency exchange in the United States. Despite its strong reputation, Coinbase has not avoided scrutiny and skepticism. It has intensified in the past two years, driven by the sharp rise and fall of cryptocurrency prices in a short period. But what has become the hot topic is the sudden collapse of FTX, the former largest cryptocurrency exchange worldwide.
However, he is still an influential figure in the market. True believers look to cryptocurrencies despite not being a proven hedge against inflation. Bitcoin's inverse correlation with inflation has shown how much macroeconomic indicators influence cryptocurrency prices. Traders continue to take advantage of cryptocurrency volatility to make huge gains.
Due to this, Coinbase has high cryptocurrency balances. This massive cryptocurrency exchange giant is taking advantage of the weakness of its smaller peers. Its inflows and outflows may be overwhelming at times, but its liquidity ensures its ability to continue its operations. Hence, this article will explain why Coinbase is a safe cryptocurrency exchange platform.
What makes Coinbase a safe and liquid cryptocurrency exchange
As a beginner in cryptocurrency trading, one often looks for those exchanges with low transaction fees and secure user anonymity. But the most important consideration is whether it can maintain business operations through large transactions.
Having been in this space for over a decade, we probably don't have to ask ourselves: “Is Coinbase safe?” It has seen massive ups and downs, such as the bursting of the cryptocurrency bubble in 2017-2018 and the fallout from FTX in 2022. Its liquidity and wise allocation of tokens makes it one of the most durable cryptocurrency exchanges. These are some of the reasons why Coinbase is a secure cryptocurrency exchange.
Stable monthly market share
Since the FTX collapse, we have seen how Binance quickly took over the market. It has dethroned Coinbase and held a wide margin from its peers for a long time.
However, Coinbase showed that it has not faltered yet and there will never be another FTX despite the significant drop in trader confidence. Binance may be the giant now, but Coinbase is one of the original cryptocurrency exchanges. It has stood the test of time, weathering massive shocks in the cryptocurrency market in recent years.
But what makes it a memorable competitor in the cryptocurrency exchange is its stable market share. In January 2023, its market share reached 6.97%. It fell to 4.58% in just one month, the lowest market share in many years.
It rebounded in the following months but remained within the 5-6% range. But from the second half of 2023, we could see a sustained increase in its market share before it rises to 6.2%. There have been some ups and downs, but they have been more manageable than in 2022.
At the end of the year, the market share rose again to 6.34%. As of today, it is recorded at 6.35%. It may be lower year over year but it is much better than in previous months. The continued recovery shows that it can withstand challenges and regain momentum amid intense competition. It is truly a flexible crypto exchange.
If we compare it to other exchanges, Coinbase has seen one of the most stable changes in market share in the past year. Take Binance as an example. It remains the largest exchange but has already lost about 25% of its market share after falling from 59% in January 2023 to 35% today.
We can attribute this to the recent controversy where she admitted her mistake in violating the US Anti-Money Laundering Law. Hence, its close competitors, such as Coinbase, OKX, and Upbeat, are leveraging it to generate more traders.
Cryptocurrency balance increases
Another factor to consider is the liquidity and availability of digital assets. Due to its sufficient balance of major cryptocurrencies, Coinbase remains a massive cryptocurrency exchange. These include Bitcoin (BTC) and Ethereum (ETH).
Coinbase is the second largest cryptocurrency exchange in total Bitcoin balance. As of this writing, it has 411,762.68 BTC or 2.2% of the total supply circulating in the market. It also has a narrow gap with Binance, the largest holder of Bitcoin, with 554,836.88 or 2.8% of total market volume.
Bitfinex comes in third with 388,742.04 or 2.0% of the total market supply. The three largest Bitcoin exchanges have a wide margin from fourth place, OKX, with just 132,678.97, or 0.7%.
Regarding Ethereum, the total balance on Coinbase is 2,185,579.12, or 1.8% of the total circulating supply. It ranks third after Binance and Bitfinex with 3,770,920.82 or 3.1% and 2,349,649.56 or 2.0%, respectively. Kraken comes in fourth place with 1,691,412.27, or 1.4% of the total coins in circulation. These four largest Ethereum holders are much larger than OKX, the fifth-place holder with 945,955.80 or 0.8%.
Even among other cryptocurrencies, Coinbase also has one of the largest reserves. It ranks second in USDC with 516,852,821.09, although it is much lower than Binance with 1,454,578,122.56. It has a significant difference over OKX, third place, with 157,577,919.60. The remaining exchanges with USDC have a balance of less than 100,000,000.
For smaller cryptocurrencies, Coinbase remains popular as it is one of the top ten holders of their reserves. Many examples include DAI (5th- 2,848,007.58), USDT (9th- 35,157,653.02), SKL (7th- 7,393,205.74), and USDP (4th- 482,327.81).
Given this, Coinbase appears to have sufficient liquidity levels, allowing it to continue high volume transactions. This is a crucial aspect to consider in a highly volatile market.
Token wise allocation
Traders should also consider the level of dependence on a particular token or currency. The former largest cryptocurrency exchange, FTX, may have neglected this crucial aspect. Its reliance on its own cryptocurrencies led to its unexpected collapse in 2022. This led to capital outflows on many other exchanges, and Coinbase was no exception.
A little note, it doesn't look like Coinbase is another FTX in the making, given its high balance between different cryptocurrencies. Don't rely too heavily on one cryptocurrency. It has many cryptocurrencies and is part of the top ten exchanges for many of the cryptocurrencies it holds.
Like most cryptocurrency exchanges, Bitcoin remains the most abundant reserve. It is an important symbol because it is widely accepted by many companies around the world. Ethereum comes in second place, and is also used in commercial and government transactions. Many government agencies take Ethereum contracts in exchange for their services.
These two digital currencies are considered essential in different states, especially Texas, which has the ninth largest economy in the world. This is why following the requirements and processes for forming an LLC in Texas is easier with cryptocurrency payments.
As such, Coinbase can withstand a massive inflow of a single cryptocurrency. Fortunately, its high liquidity will help it cover lost capital while refocusing on other reserves.
Main sockets
Coinbase has been through peaks and valleys since its inception a decade ago. Although it has a long way to go before it goes head-to-head with Binance, it has huge potential to overtake the third and second places. That it has been around for over ten years says a lot about its resilience and wisdom. Hence, this cryptocurrency exchange promises safety to cryptocurrency traders.
This is a guest post by Ivan Serrano. The opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
