Mizuho: Coinbase’s prediction-market push risks ’cannibalizing’ crypto trading
Mizuho Securities warns that Coinbase’s expansion into crypto prediction markets could ‘cannibalize’ its existing trading volumes and fee revenue. The analyst note highlights that Coinbase’s new prediction-market products — which let users bet on event outcomes using crypto — may shift user funds and activity away from spot and derivatives trading on the exchange. Mizuho flagged potential revenue dilution for Coinbase as active traders migrate to lower-fee or alternative products within the same platform. The report also contextualizes the move amid intensifying competition in exchanges and the broader push to diversify retail-facing crypto products. Key implications noted: potential short-term pressure on Coinbase’s trading fees and volumes, and longer-term strategic trade-offs between product expansion and core exchange monetization. Primary subjects: Coinbase, prediction markets, trading volumes, fee revenue, Mizuho analysis.
Bearish
Mizuho’s note signals a risk to Coinbase’s core revenue line: trading fees. If users shift capital to prediction markets on the same platform — which may carry different fee structures or encourage lower-frequency/bet-style activity — spot and derivatives volumes (the primary fee drivers) could decline. Historically, product expansion that redirects user activity (notably when it lowers average fees or trade frequency) has pressured exchange revenues and stock performance in the near term. For traders, this suggests potential negative catalysts for Coinbase-related equities and could dampen sentiment for on-exchange liquidity tokens. Short-term impact: increased volatility and possible drop in Coinbase’s market-derived metrics (volumes, fees) as users experiment with new products. Long-term impact: depends on monetization of prediction markets — if Coinbase converts new activity into sustainable revenue (e.g., via take-rates, advertising, or ancillary services), negative effects could be mitigated. However, absent clear higher-margin monetization, the strategic trade-off implies persistent pressure on fee-based income. Parallel events: Exchanges adding low-fee spot/aggregator products or staking services have at times seen fee-per-user decline even as total users rose, producing mixed effects on top-line revenue. Overall, expect cautious investor sentiment and possible selling pressure until Coinbase demonstrates that prediction markets grow revenue or attract incremental liquidity rather than diverting core trading activity.