Partnered With:

With average daily turnover less than $30,000 in the first eight months of its launch, what's behind Coinbase NFT's cold market?

Read this article in 15 Minutes

Coinbase's dominant position on CEX doesn't add much to Coinbase's diversified crypto expansion, but rather its operational strategy and technical path becomes the key to the competition.

原文标题：《上线 8 个月日均交易额不足 3 万美元，Coinbase NFT 市场遇冷背后原因何在？》

Original article by Nancy PANews

On February 2, Coinbase NFT Marketplace announced on Twitter that it was suspending the Creator Drops feature on the NFT Marketplace to focus on other features and tools requested by creators, while emphasizing that it would not be shutting down the Coinbase NFT Marketplace.

In addition to some product feature suspensions, content production delays, product team reshuffling, and the resignation of the chief product officer, as well as disappointing transaction volume and user performance, Coinbase NFT market prospects have been left in doubt. Despite being backed by Coinbase, the crypto leader, the NFT market is not enjoying the cool weather. Here, PANews takes a look at Coinbase's market performance since its launch and delves into why its business is struggling.

16,000 users made only 50,000 transactions

As the head platform of a centralized exchange, Coinbase has a large user base and a high level of market attention, which also provides a solid foundation for expanding its business. In October 2021, Coinbase announced the launch of NFT trading platform Coinbase NFT, which indeed caused FOMO sentiment in the market. Before the launch in May 2022, more than 4 million users applied for registration. This is far more than the number of addresses in the history of OpenSea, the leading NFT exchange at the time.

While Coinbase NFT got off to a good start, in the eight months or so since its launch, the platform has been surprisingly lackluster, with low usage and even a number of latecomers beating it up. As of Feb. 3, Coinbase's NFT had a total transaction volume of about $7,347,000, with more than 16,000 users facilitating only about 50,000 transactions, for a daily average of less than 200 and a daily average of less than $30,000, according to Dune Analytics. In the last 24 hours, there were just 20 transactions worth $306, while OpenSea's Ethereum transactions totaled 5.5 million in the same day, or 74.8% of Coinbase's all-time NFT transactions.

Even GameStop's NFT marketplace, which entered the market after Coinbase's, saw more than twice as much trading in the first two days of its public beta than in the history of Coinbase's NFT marketplace over the same period. More than $22 million has been sold in the month since its launch. While the GameStop NFT market has also seen volumes plummet due to the market downturn and the fact that DappRadar stopped tracking data after partnering with ImmutableX, GameStop NFT's performance is clearly due to Coinbase NFT, What's more, Coinbase NFT has more encryption advantages than the traditional gaming giant.

What's behind the weak performance?

The NFT market is no longer a monolith. While OpenSea was once firmly on top of the market, a number of NFT platforms have shaken its position and taken market share with their unique innovative gameplay. As of Feb. 3, OpenSea's cumulative transaction volume over the last three months accounted for 35.7 per cent of the total NFT market, compared with Blur's 40.6 per cent and X2Y2's 11 per cent, according to Dune Analytics.

Despite OpenSea's first-mover advantage, platforms such as Blur and X2Y2 are late starters, but they are still late movers. But why hasn't the Coinbase NFT market made much of a splash despite its strong traffic and funding advantage? PANews believes that there are several factors affecting:

1, the bear market line, the overall market bleak

The timing of the launch of a new product is important to whether it can break into the market. It took Coinbase half a year to announce the launch of the NFT marketplace in October 2021 until it became publicly available in May 2022, only to see the NFT market cool down once Coinbase officially launched. CryptoSlam, an aggregator of NFT data, shows that global NFT sales have continued to decline since April 2022, and are now down more than 89.9% from the peak of more than $4.9 billion a year ago. This means that Coinbase NFT has been in a depressed market environment since its launch, and the trading volume of Coinbase NFT has slowed down significantly due to the large decrease of investor interest in NFT.

In July 2022, an unnamed Coinbase employee confirmed this factor: "The NFT website was launched too late. It was a year after the peak and people were no longer interested."

2. Web2 product teams don't really understand Web3

"Coinbase's executives come from a previous generation of companies, like Facebook and Netflix, and they don't understand this emerging market." The above employee has pointed out.

In fact, Coinbase employees posted an anonymous petition calling for the removal of Coinbase's top management. While Coinbase CEO Brian Armstrong called the idea silly and said he would fire the employee who filed the petition, Coinbase soon plans to reorganize its product team into four divisions, Four principals report directly to CEO Brian Armstrong. Surojit Chatterjee, Coinbase's chief product officer and head of NFT markets, who was hired from Google for a whopping $646 million, left at the end of October 2022 and finally on February 3 of this year.

The executive has "cashed out" about $105 million of Coinbase stock and retains 249,315 shares, which would be worth about $20.3 million at the current price of $81.46 a share, That's 2.7 times more than Coinbase's NFT has ever traded.

3, lack of characteristic play

In order to break OpenSea's monopoly, a number of platforms have sprung up using different vampire games to capture market traffic. Coinbase NFT Marketplace, on the other hand, is taking a social approach to the NFT circuit, and explicitly stating that it will build a platform for "connecting creators, collectors and fans." But for NFT traders, they are more concerned about whether the platform can better support the secondary market and whether it has liquidity.

In addition, Coinbase's NFT market has fewer features than other NFT markets that offer trade mining, airdrops, royalty cancellation, and billing incentives to acquire users. While it supports popular artists and new encrypted native NFT exclusives, the current suspension of its new NFT series will make it harder to attract users. Aggregator platform Blur, for example, took share from OpenSea with airdrops, zero commissions and optional royalties.

Not only that, but unlike other trading platforms that support NFTS on multiple blockchains, Coinbase only supports Ethereum-based NFTS, even when it incorporates LooksRare and OpenSea. Solana, Polygon and other NFT ecological development momentum can not be ignored, the transaction volume even exceeded Ethereum. Not only that, Coinbase NFT supports far fewer assets than other platforms, and is limited only to collectibles, art, virtual worlds, and so on.

4. Business is bound by compliance

Coinbase, which stands out by its compliance, also brings a yoke to its business development due to its compliance, which makes Coinbase too "rule-abiding" and lacking innovation in NFT business play.

For example, Coinbase NFT Marketplace was widely criticized by The community after releasing the first installment of "The Degen Trilogy" featuring Bored Ape Yacht Club (BAYC), Coinbase suspended plans for the BAYC NFT short film trilogy as a result, saying: "We are continually improving our content strategy and have decided to suspend production of the remaining two short films while we determine the best path forward for our creative efforts. We will continue to focus on our more direct creative endeavors."

In fact, due to the strict financial regulatory system in the United States, Coinbase's business needs to be approved by the regulatory authorities, which can easily lead to regulatory disputes. Therefore, we can see why Coinbase's NFT market will only be launched to a "small number" of users in the United States, and the NFT marketing plan is in line with the rules. For example, when Coinbase announced that it wanted to charge interest on its account, the SEC intervened. Brian Armstrong sent out an unprecedented 21 tweets to tease the regulator, but they were ignored. In addition, Coinbase's 2021 prospectus also hinted at regulatory constraints, arguing that an unregulated trading platform would create "unfair" competition for Coinbase.

All of these factors have contributed to Coinbase NFT market data showing weakness. For Coinbase, which has been Mired in massive losses, the NFT market is an important part of its efforts to improve its plight by diversifying revenue. Coinbase, after all, is struggling with plummeting revenue. A number of crypto thunderstorms over the past year have slashed trading volumes in the crypto market, causing Coinbase's 2022 revenue to plunge. Brian Armstrong said Coinbase's revenue for the year had "halved," and the company's stock price has fallen sharply. The credit rating agency Moody's even downgraded Coinbase's (COIN) long-term credit rating and its secured senior unsecured notes, citing "significantly diminished revenue and cash flow generation," and the company has repeatedly slashed staff to reduce expenses.

Most of Coinbase's revenue comes from crypto transaction fees, and the volatility of that revenue has led the company to try to diversify away from that dependence, which is why Coinbase's NFT marketplace plans to start charging industry-standard processing fees in the future after adopting zero fees. In fact, the rapid growth in the volume and value of transactions in the NFT market has led to a sharp increase in the industry's profits. For example, with OpenSea's current $15.3 billion in transactions, the platform's total transaction fee revenue is $382 million. To that end, Armstrong has even optimously predicted that Coinbase NFT's new business "could be as big or bigger than its core cryptocurrency trading business."

Just as Yahoo and Google fought in the Web2 world, the old search engine leader tried to fight the competition by upgrading its technology and inserting information like maps, yellow Pages and weather forecasts directly into search results. "Just because Yahoo has a search box, That means they're Google." In the crypto world, although Coinbase occupies a dominant position in CEX, and even takes the lead in taking an important step in the mainstream market, this does not add to the expansion of its diversified crypto business. Instead, its operational strategy and technical path become the key to competition.