Coinbase takes on OpenSea with its own NFT marketplace
Says no NFT traders ever. Non-fungible tokens (NFTs) — the tech behind pixelated pictures of monkeys and rocks selling for obscene amounts — have become one of 2021’s biggest trends. And large public companies want a piece.
Would you buy a picture of a rock for $1.3M?
In August, NFT trading volume jumped 10x to $3.25B compared to the previous month. Volume peaked in August — with OpenSea’s volume dropping 50% in the first week of September and slowing even more in recent weeks.
- The bear case: NFTs are a speculative bubble waiting to burst.
- The bull case: NFTs are here to stay with nearly everything turning into an NFT.
OpenSea is the world’s largest NFT marketplace — which allows people to buy and sell NFTs — with ~97% market share in August.
- Crypto trading exchanges like Binance, the world’s largest crypto exchange, and FTX (5th place) also launched their own NFT marketplaces.
- Last week, Coinbase announced plans to launch its own by the end of 2021 — with the waitlist topping 1.35M on the first day.
What is Coinbase without crypto
Coinbase — whose fortunes closely mirror Bitcoin’s — had a tragic debut on the stock market in April. As Bitcoin crashed, so did Coinbase — falling 30% in the first two months. The company has a few problems to resolve and it’s hoping NFTs will help:
- Reliance on crypto trading fees — which made up 96% of its sales in 2020.
- Competition heating up as other brokerages launched crypto trading in the past month — i.e. Public.com and Interactive Brokers.
But here’s how Coinbase can succeed. To buy an NFT, users purchase crypto on exchanges and set up a crypto wallet that connects to the NFT marketplace.
Coinbase is planning to simplify the process by combining everything into one platform — while providing its 68M users access to NFTs.
Investors: Still a niche business
Despite the 10x increase in NFT volume in August, users interacting with NFTs only grew 202%. And in September, there were only 10,000 active NFT wallets — meaning, transactions were still being made by a small set of users.
- Coinbase could have trouble getting wider adoption and it’ll need to convince enthusiasts to migrate away from OpenSea.
- And don’t underestimate the power of OpenSea’s early start. Marketplaces benefit from network effects — each additional user makes the platform better.