Coinbase CEO Brian Armstrong says new NFT marketplace could be bigger than its cryptocurrency business
Coinbase Global Inc. co-founder Brian Armstrong says the market for non-fungible tokens could rival or even be larger than the company’s cryptocurrency business.
That was a bold statement from Coinbase’s chief executive officer, made on a conference call Tuesday after the largest U.S. digital-asset exchange reported third-quarter revenue of about $1.3 billion. The declaration helped to ease concern that revenue was below forecast even after a more than fivefold increase from a year earlier.
Coinbase plans to open its own NFT marketplace, where people will be able to trade digital art and other items, in the next quarter or two. The company wants to offer a one-stop experience for users where they can make purchases and store their holdings on a platform that would provide a social media experience more similar to Instagram than a traditional marketplace such as EBay Inc.
Coinbase has received more than 2.5 million emails seeking to sign up for the marketplace since it was first announced in October. The biggest existing NFT marketplace, OpenSea, had about 236,000 unique user addresses interacting with it in the last 30 days, according to data tracker DappRadar. Coinbase is an investor in OpenSea.
Users will be able to showcase their NFTs on the Coinbase site, and let others follow their profile and receive updates. Such features could be key to getting the word out and attracting users at a time when many social networks are jumping into the NFT market as well.
Twitter Inc. recently said it would let users authenticate NFT art in their profiles. The social site just hired Tess Rinearson, who previously led development of software used in projects like Cosmos, to head a group focused on crypto and related technologies. Meta Platforms Inc., formerly known as Facebook, meanwhile, is trying out a new crypto wallet for international money transfers, which could also be used for storing NFTs.
“We are very excited about NFTs, this is going to be a very large area for crypto in the future, and it already is today,” Armstrong said Tuesday. “It could be as big or bigger” than the company’s cryptocurrency business.
Assuming the NFT marketplace feature launches this year, “it can be 7% accretive to COIN’s 2023 earnings,” said Owen Lau, an analyst at Oppenheimer & Co.
The NFT market overall has ballooned in the past year. OpenSea alone saw nearly $2 billion in transaction volume in the past 30 days, according to DappRadar.
Coinbase makes most of its revenue from retail users’ trading fees. That means that during times of high volatility and falling prices, when small traders stay away, Coinbase’s revenue can drop. To increase predictability, Coinbase has been working to diversify its revenue by courting institutional traders, and offering and looking to offer other services, of which NFT trading is just one. While Coinbase hasn’t disclosed its fees for the NFT feature, they will likely be in line with those charged by OpenSea, or about 2.5% of transaction value, said John Todaro, an analyst at Needham & Co.
“At a high level, this product suite could materially add to COIN revenues and would be a great diversification add,” Todaro said.
More must-read business news and analysis from Fortune:
- From Delta to Southwest, the airlines in the best—and worst—shape going into a chaotic holiday season
- How a risky bet on the Shiba Inu coin made this warehouse manager a millionaire
- Patagonia doesn’t use the word ‘sustainable.’ Here’s why
- Will monthly child tax credit payments continue in 2022? Their future rests on Biden’s Build Back Better bill
- ‘I’m afraid we’re going to have a food crisis’: The energy crunch has made fertilizer too expensive to produce, says Yara CEO
Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.