Coinbase is losing market leadership to Uniswap and Binance

Coinbase is on the verge of losing its dominance in the crypto market. Uniswap, one of the biggest decentralized exchanges, is almost surpassing Coinbase’s trading volume, as the recent data shows. Meanwhile, Binance has overtaken Coinbase in Bitcoin balances.

According to a report by Kaiko, the market share of trading volumes for Uniswap against Coinbase has increased from 27% to 50% since the beginning of the year. The growing use of Uniswap has been related to a significant drop in Ethereum’s gas fees.

While the Ethereum gas fees are high, it deters people from using decentralized exchanges (DEXs) because of the high costs. During the DeFi summer of 2020, Ethereum gas fees climbed to over $100, making it financially unfeasible for investors to use them. However, with the gas fees dropping, DEXs have become increasingly popular.

Another factor causing the increasing trading volumes on Uniswap is the role that these platforms play in stablecoin swaps. Stablecoins have been under intense pressure following the collapse of TerraUSD (UST) and Tether (USDT) trading at a discount. Stablecoin pools now have the largest total value locked (TVL) in DEXs.

Meanwhile, Binance has proved to be quite resilient despite the ongoing bear market. While most companies have been halting withdrawal services and even laying off employees, Binance has announced expanding its workforce by another 2000 employees and even launched zero-fee Bitcoin trading.

The Coinbase and Binance rivalry has intensified with the former’s launch of zero-fee Bitcoin trading. Coinbase has been holding the largest amount of Bitcoin since 2014. However, since 2021, the exchange’s Bitcoin balances have been dropping, while Binance’s Bitcoin balances have been increasing.

According to Glassnode analytics, Binance finally flipped Coinbase on July 18, with the largest number of Bitcoin inflows into Binance since January 2022.

There is no certainty that Coinbase will reclaim its former position as there have been speculations over the exchange’s financial position after recently halting its affiliate program. One of the largest cryptocurrency exchanges by trading volumes has been facing a turbulent year. During Q1 2022, Coinbase reported a net loss of $430 million, causing a notable plunge in COIN stocks. In May, the company announced it would lay off 18% of its staff because of the bearish market conditions.