With the currently depressed cryptocurrency prices yet to recover from January’s massive correction, most crypto investors are struggling to produce a profit this year. Perhaps it is even safe to assume that many digital portfolios have suffered substantial losses similar to the crypto market as a whole.
Surprisingly, not all the players in the crypto industry are negatively affected by the market decline. Some cryptocurrency exchanges, for instance, continue to rake in billions of dollars in revenues despite the depressed prices of digital currencies.
Coinbase Projected to Post $1.3 Billion in Revenues
Coinbase, the U.S.’s largest crypto exchange, is expected to rake in an astounding $1.3 billion in revenues for 2018, according to a report by Bloomberg.
The cryptocurrency exchange is also expected to post a $456 million profit for 2018. This is a significant rise in the company’s financial performance over previous years. In 2016, Coinbase recorded a net loss of $16 million while it posted a $380 million profit in 2017.
Binance Expects $1B Profit
Just like its U.S.-based counterpart, Binance is predicting $1 billion in profit this year, according to a Forbes report. Despite its late entry to the scene with the company’s founding in 2017, the exchange was able to catch up to its peers after amassing an international clientele of over 10 million users.
Binance was previously headquartered in China but had to move its operations due to the anti-cryptocurrency stance of the Chinese government. Today, the crypto exchange has offices all over the world such as Malta and Taiwan with plans to open up new locations in the future as it expands its operations internationally.
Why These Crypto Exchanges Seem Impervious to the Market Slump
With cryptocurrencies still way below their values at the start of 2018, it seems almost impossible for these exchanges to continue to generate astounding revenues. But there is actually a very simple explanation for it – crypto exchanges’ revenue comes from transactions and trading fees.
For every transaction, either withdrawals or trades, crypto exchanges earn around one percent of the transaction size but could differ depending on the exchange. Despite the depressed values of digital currencies, many traders and investors continue to buy cryptos as they view the bearish market as the perfect opportunity for accumulating digital assets at bargain prices. This means that despite the current market slump, exchanges may continue to rake in profits. A rise in the number of users on the exchange’s platform would also help generate profits, even during bearish market phases.
This profitability is perhaps one of the reasons why Coinbase is now a valued $8 billion. In a recent funding round that raised $300 million, investors eagerly snapped up company shares catapulting its value to 400 percent of its $1.6 billion valuation in August 2017.