NounsDAO on the Brink of Treasury Division Split Amidst 'Rage Quit' Uprising by NFT Holders
SEC's Response to Challenge Groundbreaking XRP Ruling
U.S. Fed's Vice Chair Barr Suggests CBDC Decision Remains a ‘Long Way’
Coinbase, a prominent crypto exchange, has experienced a decline in its market share within the flourishing ether (ETH) staking industry. This decrease can be attributed to the increasing burden placed on its staking service by regulatory authorities in the United States.
Coinbase's market share in ETH staking has witnessed a significant decline, sliding to 9.7% as reported by a Dune analytics chart from 21Shares, a digital asset investment product issuer. This marks the lowest level observed since May 2021, indicating a notable decrease from the previous recorded figure of 13.6% on April 12. Notably, the drop in market share coincided with the Ethereum Shanghai upgrade, which facilitated the introduction of withdrawals for the first time.
The downturn occurred due to the surging demand for ETH staking, which involves locking up tokens to contribute to blockchain security while earning passive income from holdings. The implementation of the Shanghai upgrade triggered a massive influx of staking deposits, surpassing withdrawals by approximately 3.5 million ETH, equivalent to $7.3 billion at current market prices.
During the same period, Coinbase experienced a net outflow of $517 million (equivalent to 272,315 ETH), which ranked as the second-highest amount after its rival cryptocurrency exchange, Kraken.
“A potential reason could be that investors do not want to be exposed to regulatory risk by using Coinbase’s staking services,” Tom Wan, analyst at 21Shares.
Coinbase market share in ETH staking (Dune Analytics/21Shares)
Kraken faced a lawsuit from the U.S. Securities and Exchange Commission (SEC) earlier this year, leading to the closure of its staking service for customers in the United States. This action was taken as part of a settlement agreement between Kraken and the regulatory agency.
On June 6, the SEC initiated legal proceedings against Coinbase, accusing the company of breaching federal securities laws by providing unregistered securities to its users through its staking service. Despite this legal action, Coinbase expressed its unwavering dedication to maintaining its staking service.
After the lawsuit, Coinbase experienced a substantial exodus of users as they unstaked their tokens and withdrew funds from the exchange. Blockchain data compiled by 21Shares indicates a net outflow of $183 million. The data reveals that Coinbase pulled out around 149,300 ETH from Ethereum's proof-of-stake network, while depositing a mere 52,992 tokens.
Coinbase, retaining its position as the second largest staking service provider, faced stiff competition from rapidly growing rivals such as Figment, RocketPool, and Kiln, as indicated by a Dune chart. The gap between Coinbase and these challengers has been steadily diminishing.
With a 25% commission on user rewards generated through staking, the exchange experiences a decline in revenue when the number of staked tokens decreases.
