On February 2, Coinbase NFT Market announced on Twitter that it is suspending the Creator Drops function on the NFT Market to focus on other features and tools requested by creators, while emphasizing that it will not close the Coinbase NFT Market.
In addition to the suspension of some product functions, the suspension of content production, the reorganization of the product team and the resignation of the product chief, as well as the unsatisfactory performance of the transaction volume and number of users, have drawn huge question marks over the development prospects of the Coinbase NFT market. Although it is backed by the big tree of “the first encrypted stock” Coinbase, its NFT market is not “easy to enjoy the cool”. In this article, PANews will review the market performance of Coinbase NFT since its launch, and deeply analyze the reasons why its business is struggling.
16,000 users completed only 50,000 transactions
As the top platform of centralized exchanges, Coinbase covers a large user base and has a high degree of market attention, which also lays a solid foundation for expanding business. In October 2021, after Coinbase announced that it would launch the NFT trading platform Coinbase NFT, it did arouse FOMO sentiment in the market. By May 2022, the number of users who applied for registration exceeded 4 million, and this number far exceeded OpenSea, the leading NFT trading platform at the time. The total number of historical interaction addresses.
Although Coinbase NFT had a good start, in about 8 months after the platform was officially launched, the business performance was surprisingly mediocre, the usage rate was very low, and it was even “beaten” by many latecomers. According to data from Dune Analytics, as of February 3, the total transaction volume of Coinbase NFT was about 7.347 million US dollars, and more than 16,000 users only facilitated about 50,000 transactions. The average daily transaction volume was less than 200, and the average daily transaction volume was insufficient. $30,000. In the past 24 hours, the number of transactions was only 20, with a transaction volume of $306. On the same day, OpenSea’s Ethereum transaction volume reached 5.5 million, accounting for 74.8% of the total historical transaction volume of Coinbase NFT.
Even the NFT market under the American game retailer GameStop, which entered the market later than Coinbase NFT, its trading volume within two days of its public beta launch was twice the historical trading volume of the Coinbase NFT market during the same period. The transaction volume has exceeded 22 million US dollars within a period of time. Although the GameStop NFT market has also plummeted in trading volume due to market downturn and other reasons, and data platforms such as DappRadar stopped tracking data after cooperating with ImmutableX, the performance of GameStop NFT is significantly better than that of the Coinbase NFT market, not to mention that Coinbase NFT is better than this Traditional gaming giants have more crypto advantages.
What is the reason behind the weak performance?
The NFT market is no longer a monopoly. Although OpenSea once firmly occupied the throne of the market, many NFT platforms have shaken its status in the arena and seized a certain market share by virtue of their unique and innovative gameplay. Dune Analytics data shows that as of February 3, OpenSea’s cumulative transaction volume in the last three months accounted for 35.7% of the entire NFT market share, while Blur’s was 40.6%, and X2Y2’s was 11%.
Regardless of the first-mover advantage of OpenSea, although platforms such as Blur and X2Y2 started late, they still come from behind. However, the Coinbase NFT market, with its own strong traffic and capital advantages, still failed to splash much. What is the reason? PANews believes that there are the following factors:
1. The bear market is on the line, and the overall market is bleak
Whether a new product can open up the market or not depends on the timing of its launch. It took Coinbase half a year from announcing the launch of the NFT market in October 2021 to its public availability in May 2022, but it faced a cooling of the NFT market after its official debut. According to data from NFT data aggregator CryptoSlam, since April 2022, global NFT sales have continued to decline, and are currently down by more than 89.9% from the peak transaction volume of over US$4.9 billion a year ago. In the sluggish market environment, investors’ interest in NFT has greatly decreased, resulting in a sharp slowdown in its trading volume.
In July 2022, a Coinbase employee who did not want to be named also confirmed this factor, “The NFT website was launched too late, and when the NFT was launched one year after the peak, people were no longer interested.”
2. The Web2 product team does not really understand Web3
“Coinbase’s executives come from the previous generation of companies, like Facebook and Netflix, and they don’t understand this emerging market.” The above-mentioned employees have pointed out.
In fact, Coinbase employees have anonymously posted a petition calling for the removal of Coinbase’s top executives. Although Coinbase CEO Brian Armstrong thought this idea was stupid, and even said that he would fire the employees who filed the petition, soon, Coinbase plans to reorganize its product team. The reorganized team will be divided into four departments, composed of four The head reports directly to Chief Executive Brian Armstrong. Surojit Chatterjee, the product chief and NFT market leader that Coinbase hired from Google with a huge salary of US$646 million, also proposed to resign at the end of October 2022, and finally officially resigned on February 3 this year.
And the executive has “cashed out” about $105 million in Coinbase shares, and still retains 249,315 Coinbase shares. Based on the current price of $81.46 per share, these shares are worth about $20.3 million, far exceeding the history of Coinbase NFT 2.7 times the transaction value.
3. Uncharacteristic style of play
In order to break the monopoly position of OpenSea, many platforms have emerged in the market to grab market traffic through different vampire tactics. The Coinbase NFT market, on the other hand, cuts into the NFT track centered on social networking, and clearly stated that it will establish a platform to promote “connection between 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 capabilities.
In addition, compared to other NFT trading markets, which have launched trading mining, airdrops, cancellation of royalties, pending order rewards and other incentives to acquire users, the Coinbase NFT market has fewer features. Its suspension of new series of NFTs will make it harder to attract users. For example, the aggregator platform Blur has seized a lot of market share from OpenSea by relying on strategies such as airdrops, zero handling fees, and optional royalties.
Not only that, but unlike other trading platforms that support NFTs on multiple blockchains, Coinbase NFT supports only Ethereum-based NFTs, even if it aggregates LooksRare and OpenSea, it also only supports Ethereum NFTs, while Solana, Polygon, etc. The momentum of NFT ecological development cannot be ignored, and the transaction volume even exceeds that of Ethereum. Not only that, but Coinbase NFT supports far fewer assets than other platforms, and the only types are limited to collectibles, art, virtual worlds, etc.
4. Business is bound by compliance
Coinbase, which stands out by virtue of compliance, also brings a shackle to its business expansion due to compliance, which makes Coinbase too “rule-abiding” and lacks innovation in NFT business gameplay.
For example, after releasing the first part of the “The Degen Trilogy” short film series themed on Bored Ape Yacht Club (BAYC), the Coinbase NFT market was widely criticized by the community. For this reason, Coinbase suspended the plan to produce the BAYC NFT short film trilogy , adding, “We are continually refining our content strategy and have decided to pause production on the remaining two short films while we determine the best path forward creatively. We will continue to focus on more immediate creative endeavors.”
In fact, due to the strict financial regulatory system in the United States, the development of Coinbase’s business needs the approval of the regulatory authorities. A small number of users, and NFT marketing planning is also quite satisfactory. For example, when Coinbase announced that it wanted to promote account borrowing and interest-bearing, it was strongly intervened by the SEC. For this reason, Brian Armstrong sent 21 tweets in a row to complain about the regulatory authorities, but they were ignored. In addition, the 2021 prospectus submitted by Coinbase also hinted at the business constraints brought about by regulation, arguing that unregulated trading platforms would create “unfair” competition for it.
The above factors have caused the weak performance of various data in the Coinbase NFT market. For Coinbase, which has suffered huge losses, the NFT market is an important layout for it to try to improve its predicament through income diversification. You know, Coinbase is facing a plight of a sharp drop in revenue. In the past year, multiple thunderstorms by encryption institutions have caused the trading volume of the encryption market to drop sharply, which has caused Coinbase’s revenue in 2022 to drop sharply. There was also a sharp drop, with credit ratings agency Moody’s even downgrading the long-term credit rating of Coinbase (COIN) and its secured senior unsecured notes, citing a “substantial weakening in revenue and cash flow generation.” There have also been several major layoffs to reduce expenses.
Most of Coinbase’s revenue comes from encrypted transaction fees. The instability of this part of revenue makes it try to reduce this dependence through business diversification. This is why the Coinbase NFT market plans to start following the industry after adopting zero handling fees in the future. The reason for the standard handling fee. In fact, the rapid increase in the transaction volume and transaction value of the NFT market has also led to a sharp increase in the industry’s profits. For example, the current total transaction volume of OpenSea reaches 15.3 billion US dollars, so the total transaction fee income obtained by the platform is 382 million US dollars. For this reason, Brian Armstrong even optimistically predicted that the scale of Coinbase NFT, a new business, “may be as large as its core cryptocurrency trading business, or even larger.”
Just like the battle between Yahoo and Google in the Web2 world back then, in order to compete with Google, Yahoo, the old search engine leader at the time, attempted to counter the competitive pressure by upgrading its technology and inserting information such as maps, yellow pages, and weather forecasts directly into search results. However, ” Just because Yahoo has a search box doesn’t mean they’re Google.” In the encryption world, although Coinbase occupies a dominant position in CEX and even takes an important step in the mainstream market, this does not add points to its diversified encryption business expansion. Instead, its business strategy and technology path become the key to competition.
