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WE-Launch
DCG Founder's Interview: From Bitcoin Pioneer to AI Revolution, Barry's Crypto Empire and Bittensor Vision
Original Article Title: Barry Silbert is Back: The Next Big Crypto Bet
Original Article Author: Raoul Pal
Original Article Translation: Yuliya, PANews
In today's fast-paced world of cryptocurrency and blockchain technology, Barry Silbert, the founder and CEO of DCG (Digital Currency Group), is undoubtedly a pioneer in the industry. In his latest podcast interview with Raoul Pal, Barry shared his journey from early Bitcoin investor to building DCG and its subsidiaries such as Grayscale and Foundry, experiencing the market's bull and bear cycles, including the 2022 cryptocurrency crash.
Today, Barry is setting his sights on the next major bet - Bittensor. He elaborated on his role as the founder and CEO of Yuma, and how Bittensor could potentially become a more transformative decentralized intelligence network layer than Bitcoin. This article will delve into Barry's experiences, DCG's development, the 2022 crisis, and his outlook on the future of Bittensor and AI. PANews provided the textual translation for this podcast.
Bitcoin Enlightenment Journey
Q: Barry, please share how you transitioned from Wall Street to Bitcoin?
Barry: I was initially an investment banker, but I realized the need to create something new, so I founded the first secondary market for private stocks and illiquid assets, Second Market. This platform played a crucial role during the 2008 credit crisis when many companies like Facebook and Twitter couldn't raise funds through the IPO market, and Second Market became a vital channel for trading their stocks.
In 2011, I first encountered Bitcoin through a Wired article/Jason Calacanis's podcast. At that time, I still believed the impact of the credit crisis had not subsided, so I remained cautious. I spent six months researching Bitcoin, reading vast amounts of material, and engaging with industry insiders. By early 2012, I realized that Bitcoin could have a profound impact on the world and decided to get involved to avoid future regrets.
Q: At what price did you initially purchase Bitcoin?
Barry: I purchased hundreds of thousands of dollars worth of Bitcoin at a price of 7-8 dollars through the Mt. Gox platform. The price surged to 30 dollars at one point and then dropped to 5 dollars. Over the next 6-12 months, it started to rise again to 50, 60, 70 dollars. I then began looking for companies to invest in that were building Bitcoin infrastructure, such as early investments in Coinbase, Chainalysis, Ripple, and other first-generation infrastructure companies.
Interestingly, I actually made these investments using Bitcoin. If I had just held onto those Bitcoins instead of investing in these companies, I would have actually had a better return. Those of us early Bitcoin holders have similar stories—In 2013, when my wife and I had our first daughter, we were both trying to get people to use Bitcoin. I remember using Bitcoin worth 2000-5000 dollars to buy gift cards, mainly to buy diapers. I've never looked back to calculate how much that money is worth now, but it's safe to say that the value of that Bitcoin from 2013 is astounding today.
The Rise of an Empire: The Birth of Grayscale and DCG
Q: How did Grayscale and DCG come into existence?
Barry: At that time, I was running Second Market, and I told the board (including Chamath Palihapitiya) that I thought we should do something significant in the Bitcoin space. We had tens of thousands of sophisticated investors looking for interesting alternative investments. I understood the history of gold and gold investment, and knew that the Gold ETF was the catalyst that made gold a accessible, and legitimate asset class.
I decided to build a Bitcoin version similar to the SPDR Gold ETF. We reached out to the SEC, but they knew nothing about Bitcoin. We quickly realized that the SEC would not allow a Bitcoin ETF in 2013, so we did something groundbreaking—we launched it as a private placement and then made it publicly tradable on the OTC QX market, which became the Grayscale Bitcoin Trust.
Since we purchased a large amount of Bitcoin, we also established a Bitcoin trading desk, started buying Bitcoin ourselves, and investing from our balance sheet. Eventually, in 2014, Nasdaq called saying they wanted to acquire Second Market, so I sold Second Market to Nasdaq and went all-in on Bitcoin. The Bitcoin product became Grayscale, the trading operation became Genesis, and the investment portfolio became DCG.
Question: How much assets does Grayscale currently manage?
Barry: I believe it's around $300 billion by the end of the year. Grayscale, as a pioneer, has been highly innovative in its product design, making this asset class more easily accepted by the mainstream market, although many investors still find it challenging to participate conveniently.
Grayscale now has over 30 different products, including Bitcoin Trust, Bitcoin Mini, Large Cap Trust (GDLC), followed by Single Token Trust. Grayscale's model is to open up these tokens, making this asset class more accessible to a broader range of investors, transforming it from private trusts to publicly traded trusts.
I like to think of Grayscale as the next Vanguard Group. Just as Vanguard Group pioneered index investing, PIMCO pioneered bond investing, Grayscale is pioneering crypto investing.
Question: What is DCG's investment strategy?
Barry: We talk about what we call the 'DCG playbook.' We identify protocols and tokens that we believe have the opportunity to change the world, and then we bring our capabilities to those ecosystems: we invest, build, purchase, educate, and create access. This doesn't happen often; I do it about once every five years, but when we do it, we are very successful.
The uniqueness of DCG's model is that we are a private company rather than a fund. As a private company and not a fund, I have the luxury of permanent capital and time. We can make investment decisions and capital allocation decisions; I have this interesting job of trying to anticipate the world five or ten years from now and take a bet. I am wrong more often than I am right, but when you are right, the returns are enormous.
Question: How did DCG grow into such a large enterprise?
Barry: We are in a unique position to be a bridge between this asset class and the traditional investment markets. Over the next five years, we launched Foundry, now the largest Bitcoin mining pool globally. Prior to Foundry, the U.S. had virtually no Bitcoin mining activity, while China controlled about 80% of the hash rate.
We decided to bring Bitcoin mining to the U.S. by providing funding to U.S. miners, purchasing a significant amount of equipment from manufacturers, and then providing financing to these miners to help them get started. As part of it, we set up this mining pool, and now one-third of Bitcoin transactions go through the Foundry USA pool we created.
We also acquired CoinDesk during the depths of the cryptocurrency bear market for $300,000, developed it into a business, and sold it to my friend Brendan a year ago at a good price. Additionally, we acquired Luno (a Coinbase-like platform targeting emerging markets, mainly dominant in Nigeria and South Africa). So far, we have invested in about 300 companies and 50 different crypto assets.
Q: How does your mining business work?
Barry: We have two businesses. One is Foundry, which operates a mining pool and has established the infrastructure that allows these U.S. miners to mine Bitcoin and secure the network. It also has on-the-ground operations with a team essentially setting up and operating facilities for many miners across the country. Foundry doesn't take on capital risk or engage in miner procurement or Bitcoin price speculation. Its core mission is to drive the infrastructure development of the U.S. Bitcoin mining industry. For us, this is obviously a complex challenging business because it's Bitcoin, your revenue is fluctuating, but we don't have to make large capital investment decisions or evaluate hash rates or payback periods.
The other business is Fortitude, where we actually mine ourselves. We developed or created the first "risk miner," where we mine many different tokens, all proof-of-work (POW) tokens, viewing mining more as venture capital. It's a nice business, not many miners do this.
Crisis and Rebirth
Q: How did the 2022 cryptocurrency crash happen?
Barry: During COVID, the global economy suffered a massive shock, with countries resorting to "money printing" policies, leading to the 2021 price surge and creating an asset bubble. Excessive leverage was widespread across various assets, with many complex relationships between known and unknown creditors and borrowers.
First, the Terra Luna decoupling event triggered a series of chain reactions. Subsequently, Three Arrows Capital (3AC) failed to meet Genesis' additional margin requirement in June, becoming the catalyst. 3AC borrowed from multiple channels, but its status as the largest borrower was not widely known. When 3AC collapsed, numerous counterparties were affected. As the largest lender and major broker in the field, Genesis had to mark-to-market its balance sheet after 3AC's collapse, leading to an equity gap. Digital Currency Group (DCG) intervened and provided support.
However, the FTX event further heightened the market's distrust, leaving all parties with no trust in their counterparties. This trust crisis led to a "bank run" on Genesis and similar institutions, ultimately forcing Genesis to shut down its operations and enter bankruptcy.
Q: What was your personal experience navigating through this crisis?
Barry: This was challenging in many ways. On one hand, everything in cryptocurrency and social media was amplified, both the good and the bad, including lies. It was shocking to see people willing to fabricate and believe these falsehoods, and I received many death threats during this time.
Additionally, I was surprised by the way regulatory agencies exercised their power. To make things even more difficult, during this process, my daughter was diagnosed with cancer, so I was managing the business crisis while also supporting my daughter through chemotherapy and surgery. Fortunately, my daughter has been cancer-free for 9 months now, and DCG is thriving.
The New Journey: Cross-Innovation of AI and xCrypto
Q: What made you transition from focusing on Bitcoin to the broader crypto space?
Barry: Part of it was having external shareholders and employees, and as the asset class grew and more applications were built, it seemed wise to stay open to other cryptocurrencies that could have practical utility. I didn't want to be a maximalist for Bitcoin's sake alone.
Another reason was encountering some very interesting teams in this process that I was excited about. I like betting on underdogs, big ideas, and visionary people. I think most people now realize that there might not be much besides Bitcoin that is valuable, which is also my sentiment now.
Q: What sparked your interest in the intersection of AI and blockchain?
Barry: Over the past 12-13 years, since my first Bitcoin purchase, I have always maintained a knowledge-based curiosity about everything happening in our space. I believe 99.9% of crypto tokens have no reason to exist, no value, so the threshold for me to be excited about something is really high.
Over the past few years, as AI became a topic, I started appreciating the power of AI. People on my team were introduced to a few individuals who wrote a whitepaper about Bittensor in 2021, and they were excited about it. I began exploring the intersection of crypto and AI, and I think many early applications will be using crypto as a payment solution for AI rather than building infrastructure on it to enhance AI.
After deep diving into Bittensor, I believe this is the next big wave in the crypto space, akin to key themes such as Bitcoin, Ethereum, NFTs, L2, and DeFi. Last year, we decided to invest in Bittensor and build a project on top of it to help educate the market, raise awareness, and create access opportunities. I launched a new business called Yuma last fall and took on the role of CEO, focusing on Bittensor's development and promotion while continuing to run DCG.
Why Bittensor Has Captured the Attention of Bitcoin OGs and AI Enthusiasts
Q: What is Bittensor?
Barry: If you ask five people what Bittensor is, you might get 15 different answers. This phenomenon is very similar to the early days of Bitcoin in 2012. At that time, Bitcoin was described as digital gold, blockchain, a payment system, and a global currency.
Bittensor is a decentralized intelligence network, with the core idea of creating a global permissionless platform incentivizing global intelligence to solve any problem or challenge. This incentive mechanism is achieved through a cryptographic token. For non-crypto folks, Bittensor can be simply understood as the intelligent World Wide Web in the information internet. Anyone can launch so-called "subnets" on this platform, which aim to harness global intelligence to solve specific problems such as computation, reasoning, data processing, or training. Subnets have already been launched to predict Bitcoin prices or sports scores.
Reflecting on the history of the internet's development, the launch of the Mosaic browser 30 years ago triggered the Cambrian explosion of websites, when people accessed the internet through Prodigy and America Online, similar to today's OpenAI and Claude. Today, Bittensor is leading a new era of open and permissionless innovation, with rapid momentum.
Q: What excites you about Bittensor?
Barry: The Bittensor project has garnered broad attention for its unique fair launch mechanism and mission-driven community. Similar to Bitcoin, Bittensor started from a whitepaper, evolved into code, and ultimately launched, without going through venture capital rounds or reserving tokens for a foundation or team members. This means that Bittensor's participants are all in due to a genuine interest in the technology, joining by buying or earning TAO tokens. The Bittensor community has thus organically formed, with members coming together due to a shared mission and ambitious goals. The project adopts a tokenomics model similar to Bitcoin, with a 21 million token cap and introduces a halving mechanism like Bitcoin, making its economic model easy to grasp. This design not only emphasizes the cryptographic technology itself but also focuses on how to address global issues through incentive mechanisms, attracting those who seek to change the world through innovative means.
Q: How does a subnet work?
Barry: Bittensor has undergone a significant upgrade in the past few months, and currently, each subnet has its own token. This structure is somewhat similar to a blockchain L2 solution, but with one key difference: each subnet token is transacted in TAO. TAO, acting as a utility currency, serves as the pricing base for all subnet tokens. When users attempt to predict which subnet can produce the most valuable intelligence, they are effectively indirectly purchasing TAO in the process of buying subnet tokens, as all transactions are facilitated by a liquidity pool. Currently, Bittensor has launched 88 subnets, with new ones emerging every two days. These subnets are independently operated by different teams, each focusing on intelligent problem-solving for their respective target scenarios. At the same time, they are collaborating to drive the widespread adoption of the entire Bittensor network and the TAO token. By attracting more funds into their subnet tokens, these funds will eventually flow into TAO, promoting the development of the entire ecosystem.
Two subnets may perform the exact same task, but one may excel, bringing billions of dollars in revenue to the entire ecosystem. As the value of this subnet's token skyrockets, the token of the other subnet will rise as well. This collaborative model stands out in the crypto space as it embodies a spirit of mutual support within the community, rather than a mere competitive relationship. Any token launched on Ethereum or Solana usually lacks value flow to their underlying platform, with teams focusing more on the growth of their own token's value rather than the success of Ethereum or Solana themselves. This phenomenon is somewhat similar to the NFT market priced in ETH, but Bittensor's subnet collaboration demonstrates a closer connection and the potential for mutual growth.
Q: What types of people are in the Bittensor ecosystem?
Barry: A Bitcoin OG believes that the current market is in a stage similar to 2012-2013, with Bittensor's price around $200 and a market cap of around $1.5 billion.
Unlike the early libertarian leanings of Bitcoin, the Bittensor community has brought together a group of technically savvy AI enthusiasts. These members have been focused on building infrastructure over the past few months to make the intelligence generated by subnets accessible or monetizable. Related applications are also growing rapidly, helping people discover, invest in, and track subnets.
Amid the current market correction, community members are focusing on the rapid development of their own projects, avoiding distractions from cryptocurrency and macroeconomic factors. Everyone is striving to build infrastructure, properly position their businesses and investments, in order to seize opportunities before the market further matures.
Against the backdrop of the current market correction, many are focusing on the development of their respective projects without being distracted by cryptocurrency and macroeconomic factors. Grayscale recently introduced the Bittensor Trust, aimed at replicating its 2013 success with Bitcoin. This move signifies Grayscale's hope that through this trust product, more investors can conveniently participate in the Bittensor and Yuma ecosystems. Grayscale's goal is to enable investors unfamiliar with or unconcerned about staking, exchanges, or Uniswap pools to also bet on projects they believe could be the next Amazon of the smart web.
Our investment strategy primarily focuses on infrastructure development, subnet tokens, and TAO itself. We typically do not support projects that attempt to create enterprise value for equity holders and token holders, but rather focus on building the Bittensor ecosystem. Specifically, we are looking for infrastructure projects similar to Coinbase, BitGo, and Chainalysis to drive Bittensor's development. Currently, we have launched an accelerator to help those interested in building subnets kickstart their projects, incentivizing global talent to participate in the competition. Additionally, users holding TAO can stake on the Yuma platform.
Q: How is Bittensor different from Bitcoin mining?
Barry: Bittensor differs from Bitcoin mining significantly in terms of economic incentive mechanisms. The Bitcoin network issues approximately $12 billion in rewards to miners annually to maintain network security. However, Bittensor utilizes these economic incentives to pay compute providers, model owners, and data owners, similar to the operation of network infrastructure. At the current TAO price, approximately $500 million circulates among various parties in the Bittensor network, and as the TAO price rises, this amount could increase to $1 billion, $5 billion, or even $10 billion. This incentive mechanism not only attracts large enterprises but also entices graduate students in dorm rooms, all striving to find the best way to contribute to the Bittensor network. This model creates a strong economic incentive for participants of all kinds, driving the network's growth and innovation.
Q: How does Bittensor address the near-zero cost of AI?
Barry: Looking back, accessing the Internet through America Online and Prodigy was the norm until the introduction of web browsers allowed users to access the same services for free. Today, Bittensor is redefining this model by providing cheaper, faster computation, modeling, and data access. Its open design allows global access to anyone, balancing the competitive landscape. This innovation will enable businesses like Uber, Airbnb, and TikTok to rise on the internet, similar to what was unimaginable in 1995.
Bittensor eliminates single points of failure, such as OpenAI or Meta API restrictions, while providing redundancy and scalability. More importantly, it offers unrestricted open access without censorship, akin to the World Wide Web. Teams need to think about how to leverage this generated intelligence to pay bills and achieve monetization. Bittensor's emergence is not just a technological advancement but also a reaffirmation of internet openness and innovative potential, providing limitless possibilities for future business models.
Q: How do you envision the future of Bittensor?
Barry: The boldest prediction I can make about Bittensor is that it may become a better version of Bitcoin as a global store of value. The Bitcoin network spends $10-12 billion annually to maintain its security, whereas Bittensor presents a brand-new vision: to use these funds to incentivize a global problem-solving network, encouraging people to find solutions to significant world issues. Imagine if these funds increase from $1 billion to $2 billion, $5 billion, or even $10 billion; the innovation and transformation that would follow. While securing the Bitcoin network is valuable, Bittensor, with its similar tokenomics features to Bitcoin, including halving mechanisms and decentralization, demonstrates tremendous potential.
But I believe Bittensor has that early Bitcoin adopter's sense of purpose, yet unlike Bitcoin, it is not about creating digital gold, decentralized currency, or eliminating government control of wallets. Instead, Bittensor aims to help solve major problems by leveraging global intelligence.
The future of the internet feels like scalable intelligence, and Bittensor is exploring the decentralized application of this intelligence. Currently, Bittensor is rolling out some subnets, some directly related to AI involving inference, training, or fine-tuning. These subnets incentivize competition, and any transaction that requires people to compete can leverage these subnets. While Bittensor's applications are currently primarily focused on AI, its potential use cases are not yet clear. It provides an incentive mechanism for decentralized work teams, encouraging them to perform tasks for others and fostering team collaboration, forming a coordination layer. Meanwhile, Yuma plans to launch product solutions this year to give people direct access to subnets.
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$COIN Joins S&P 500, but Coinbase Isn't Celebrating
On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.
On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.
Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.
In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.
Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.
Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.
According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.
This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.
Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.
In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.
According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.
However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.
The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.
On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.
With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.
In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.
Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.
Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.
In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.
Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.
Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.
Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.
In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.
Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.
Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.
Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.
Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.
Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.
With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.
However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.
In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.
The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.
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The End and Rebirth of NFTs: How the Meme Coin Craze Ended the PFP Era?
Key Market Intelligence on May 14th, how much did you miss out on?
1.Binance Alpha Launches HIPPO, BLUE, and Other Tokens
2.Believe Ecosystem Tokens See General Rise, LAUNCHCOIN Surges Over 250% in 24 Hours
3.Tiger Securities Introduces Cryptocurrency Deposit and Withdrawal Service, Supports Mainstream Cryptocurrencies such as BTC and ETH
4.Current Bitcoin Rally Possibly Driven by Institutions, Retail Traders Yet to Join
5.Binance Wallet's New TGE Privasea AI Participation Requires a 198 Point Threshold, with a Point Consumption of 15
Source: Overheard on CT (tg: @overheardonct), Kaito
PUMP: Today's discussions about PUMP focus on its new creator revenue-sharing model: the platform will allocate 50% of PumpSwap revenue to token creators, sparking varied reactions from users. Some criticize the move as insufficient or even misleading, while others view it as a positive step the platform is taking to reward creators. Meanwhile, PUMP faces market pressure from emerging competitors like LetsBONKfun and Raydium, which are rapidly gaining market share. Users also express concerns about PUMP's sustainability and potential regulatory risks in the U.S., with discussions extending to the platform's impact on the entire memecoin ecosystem.
COINBASE: Today, Coinbase became the first crypto company to join the S&P 500 Index, replacing Discover Financial Services, sparking widespread industry attention. The entire crypto community views this milestone as a significant development, signaling that crypto assets are further integrating into the mainstream financial system. The news has sparked lively discussions on Twitter, with many users pointing out that this may attract more institutional investors to enter the Bitcoin and other cryptocurrency markets.
XRP: XRP became the focal point of today's crypto discussion, with its significant market movements and strategic advances drawing attention. XRP has surpassed USDT to become the third-largest cryptocurrency by market capitalization, sparking market excitement and discussions about its future potential. The surge in market capitalization and price is believed to be related to increasing institutional interest, deepening strategic partnerships, and its role in the crypto ecosystem. Additionally, XRP's integration into multiple financial systems and its potential as a macro asset class are also seen as key factors driving the current market sentiment.
DYDX: Today's discussions about DYDX mainly focused on the dYdX Yapper Leaderboard launched by KaitoAI. The leaderboard aims to identify the most active community participants, with a total of $150,000 in rewards to be distributed over the first three seasons. This initiative has sparked broad community participation, with many users discussing the potential rewards and the incentive effect on the DYDX ecosystem. Meanwhile, progress on the ethDYDX to dYdX native chain migration and historical airdrop events have also been topics of discussion.
1. "What Is 'ICM'? Holding Up the $4 Billion Market Cap Solana's New Narrative"
Overnight, the hottest narrative in the crypto space has become "Internet Capital Markets," with a host of crypto projects and founders, led by the Solana ecosystem's new Launchpad platform Believe, releasing this phrase. Together with "Believe in something," it has become the new slogan heralding the onset of a bull market. What exactly is the so-called "Internet Capital Market," will it become a short-lived hype phrase like the Base ecosystem's previous Content Coin, and what related targets are available for selection?2.《LaunchCoin Surges 20x in One Day, How Did Believe Create a $200M Market Cap Shiba Inu After Going to Zero?｜100x Retrospective》
LAUNCHCOIN broke through a $200 million market cap today, with the long-lost liquidity and such a high market cap "Memecoin" almost bringing half of the on-chain crypto community CT into the fray. The community is crazily discussing this token, with half of it being FOMO and the other half being FUD. This token, originally issued by Believe founder Ben Pasternak under his personal identity, transformed into a new platform token after a renaming. From once going to zero to a $200 million market cap, what happened in between?May 14 On-chain Fund Flow
Within 24 hours, GOONC's market cap soared to 70 million, could GOONC be the next billion-dollar dog on the Believe platform?
Bitcoin has broken $100,000, Ethereum has surpassed 2500, and is Solana's hot streak about to make a comeback?
The current market is in a state of macro euphoria, with GOONC riding the wave today, skyrocketing 10x in just a few hours, reaching a market cap of tens of millions of dollars, trading volume soaring past 50 million, and rumors swirling that the developer may be from OpenAI (unconfirmed but intriguing enough).
A ludicrous and absurd Solana meme that some actually buy into.
GOONC is a meme coin that has sprouted from the "gooning" subculture, offering no technological innovation or practical use, its sole function being speculation.
It takes inspiration from an NSFW term "gooning," which refers to a person being deeply immersed in certain content (you know what), eventually entering a nearly religious-like trance.
In Reddit (such as r/GOONED, r/GoonCaves) and some counterculture media outlets (such as MEL Magazine in 2020), "gooning" has gradually transitioned from an adult label to a meme-addicted, digital content and virtual self-indulgence synonym, arguably the epitome of Degen spirit.
GOONC is playing around with this concept, packaging the addictive nature, uselessness, and irony of gooning into a tradable financial product. The project team has made it clear: "We do not solve blockchain problems, we only trade absurdity." Blunt but oddly genuine.
GOONC launched on May 13, 2025, using the meme coin launch platform Believe App's LaunchCoin module on Solana. This tool is highly Degen: zero technical barriers, a few clicks to create a coin, perfect for projects like GOONC that can come up with ideas out of the blue.
The mastermind behind GOONC is also quite something and is the most talked-about, with KOL @basedalexandoor on X platform (alias "Pata van Goon") personally involved. His profile even caught the attention of Marc Andreessen, co-founder of a16z, making onlookers unable to resist speculating if GOONC has a hint of OpenAI lineage.
While this 'OpenAI Endorsement' is currently just community speculation, it is definitely a good card to play to fuel hype. Saying "we are pure speculation" on one hand, while tagging a few "AI + a16z" on the other.
GOONC took off as soon as it launched. After its launch on May 13, 2025, its market capitalization skyrocketed to $22 million within 4 hours, with a trading volume exceeding $25.6 million in 24 hours. According to platform data, the first day of trading saw an astonishing +41,100% surge, soaring from $0.0000001 to $0.02, becoming a "missed-the-boat" situation.
GOONC quickly formed an active trading community post-launch, with a lot of discussion and trading signals appearing on X platform (such as the 292x return signal provided by DeBot). Liquidity pools on exchanges like Raydium and Meteora grew rapidly, supporting high trading volumes and price increases.
The real climax occurred between May 13 and May 14, with the market cap rising to $5.5 million in the morning and directly surpassing $55 million in the afternoon. By the 14th, it briefly approached a $70 million market cap, with the trading volume soaring to $59 million. Some community members even posted screenshots claiming an increase of +85,000%, creating a new myth out of the ruins.
As of 1:30 pm on May 14, the price stabilized around $0.039, with a total market cap and FDV both around $39.6 million, and a 24-hour trading volume of $5.43 million. Active platforms include XT.COM, LBank, Meteora, and others.
Although there was a slight pullback from the peak ($0.07), the coin's popularity remains strong. For a coin that relies purely on "irony + community + X post" to thrive, this performance is already at a stellar level.
Currently, the background of the token's development team is not transparent, increasing the potential risk of a rug pull. Rugcheck.xyz warns that the creator of the GOONC contract may have permission to modify the contract (e.g., change fees or mint additional tokens), posing certain security risks.
Community members speculate that the meteoric rise of GOONC may be the "last hurrah".
After Surging 40%, Has Ethereum Price Peaked Upon Exiting the Craze?
Whether you are an insider or an outsider, these days you must be familiar with the news about Ethereum. The reason is simple, causing Ethereum enthusiasts to sigh with emotion and almost throwing off-guard those who defend Ethereum, Ethereum, with a "3-day surge of 40%," climbed to the top of the Douyin Hot List.
As we all know, Ethereum launched the Pectra upgrade on May 7th. This most significant network upgrade since early 2024 integrates the Prague execution layer hard fork and the Electra consensus layer upgrade, significantly improving Ethereum's performance through 11 improvement proposals. The account abstraction feature (EIP-7702) allows users to flexibly manage wallets through social media accounts or multi-signature schemes, reducing the user threshold, attracting more users and developers. The staking mechanism optimization increases the validator ETH cap from 32ETH to 2048ETH and introduces a flexible withdrawal method, making it easier for institutions and individuals to participate in network security, enhancing the market's confidence in Ethereum's long-term value.
At the same time, Pectra optimized the interaction efficiency of Layer 2 networks such as Arbitrum and Optimism, making transactions faster and cheaper, leading to a surge in on-chain activity. As a crucial step for Ethereum's transition from "2G" to "5G," the Pectra upgrade not only enhances network vitality but also "recharges confidence" in the market, directly driving the price increase.
Related Reading: "Ethereum Skyrockets 22% in One Day, E Enthusiasts Rejoice"
It's not just Ethereum itself, as Wall Street also brought important bullish news.
The world's largest asset management company, BlackRock, proposed to the SEC allowing Ethereum ETFs for staking. This proposal is expected to elevate Ethereum ETFs from a mere investment tool to a bond-like "interest-bearing asset," bringing investors both capital appreciation and passive income, igniting market optimism about Ethereum's future potential.
Specifically, BlackRock has proposed to amend its S-1 filing to allow investors to create and redeem ETF shares directly with Ethereum instead of the U.S. dollar (i.e., in-kind redemption). This move, combined with its $2.9 billion BUIDL Fund launched in March 2024, aims to deepen the integration of traditional finance with blockchain. The BUIDL Fund is a tokenized fund operating on the Ethereum network, investing in traditional assets such as U.S. Treasury bonds. This setup is highly attractive to institutional investors, as they can not only benefit from Ethereum's price appreciation but also earn stable cash flow through staking.
Robert Mitchnick, BlackRock's Head of Digital Assets, stated in a CNBC interview in March 2025 that the addition of staking functionality will significantly enhance the appeal of the Ethereum ETF. He admitted that when the Ethereum spot ETF was launched in July 2024 without staking functionality, the market demand was lackluster, and staking could be the key to reversing this trend.
Meanwhile, the SEC's shifting stance on cryptocurrency regulation has also fueled this upward trend. During the tenure of the previous SEC chairman, the regulatory approach was tough, and staking was strictly viewed through the Howey test as a potential unregistered security. Therefore, when approving the Ethereum spot ETF in May 2024, staking functionality was explicitly prohibited.
However, with Trump back in the White House and Paul Atkins taking over the SEC, there has been a noticeable relaxation in crypto regulation. Apart from BlackRock, ETF issuers such as Invesco Galaxy, VanEck, WisdomTree, and 21Shares have also submitted applications for similar staking and in-kind redemption.
Related reading: "New Chairman Takes Office, SEC Transforms into 'Crypto Daddy' Within 48 Hours"
If staking ETFs are approved, the benefits are likely to go beyond price appreciation. The introduction of staking functionality could redefine the role of crypto assets, making them more similar to traditional financial products that provide returns and value appreciation, thereby driving Ethereum closer to mainstream finance.
Currently, the SEC still needs to address several decisions related to crypto ETFs, including whether to approve ETFs for Solana, XRP, Litecoin, and even Dogecoin. With the calls for an "altcoin season" growing louder, Ethereum's strong performance may just be the beginning of a larger crypto market frenzy.
In addition, the Trump family-related DeFi project WLFI is also bullish on this wave of rise, with frequent on-chain activities. According to on-chain data analyst @ai_9684xtpa's monitoring, a WLFI-related address is currently borrowing coins to go long on ETH, borrowing 4 million U from Aave to buy 1590 ETH at an average price of $2515 per ETH.
For this epic surge of Ethereum after half a year of silence, the community has indeed gained more confidence and hope, which has also led to a revival of the entire altcoin market. However, amidst the joy, there are also voices of pessimism. Below is a summary conducted by BlockBeats based on community discussions.
The optimists point out that the current market structure is similar to the eve of the bull markets in 2016 and 2020, predicting a life-changing surge in the next 3-6 months, where some altcoins may even achieve astonishing single-day gains of up to 40%.
@liuwei16602825 stated that this surge signifies the return of the bull market as a sure thing. There is no need to worry about a pullback. The driving force behind the surge uses a high-cost isolated operation, fearing a drop more than any retail investor and will definitely do everything to support the price.
Related Reading: "Ethereum Leads the Surge Triggering the 'Altcoin Season' Speculation, How Do Traders View the Future Market?"
The bears mainly believe that this surge is different from the bull market of 2021, as the current market lacks the confidence of large-scale retail investors entering and holding positions for the long term, with funds rotating too quickly.
@market_beggar observed that a Bitfinex E/B whale has started to close positions and believes that if this whale maintains its high-speed position-closing operation for the next few days, it can be inferred that the whale no longer sees the upside potential of ETH, preparing to take profits and exit. The closing time will be a key focus going forward.
@FLS_OTC stated that there are still many uncertainties at the macro level, and the liquidity cannot support a major bull market. At this stage, it is a "last hurrah," not a complete reversal, and will continue to remain in a short position.
@off_thetarget believes that after ETH transitioned from POW to POS, it lost the "gold standard" of mining machine power cost support. The staking economic model led to a breakdown in value anchoring. Additionally, the L2 ecosystem (such as Starknet, zkSync, etc.) suffered from liquidity fragmentation, failing to establish an effective capital inflow mechanism, causing the collapse of the split disc pattern. Furthermore, the ETH community's excessive pursuit of technical narratives divorced from real-world needs resulted in a weak ecosystem growth. Therefore, he believes that ETH's intrinsic value system has crumbled, and the price is bound to plummet to the 800-1200 range, with a decisive short position at 1800.
@Airdrop_Guard, based on the core logic of the "High Probability Trading Strategy," where three sets of underlying logic different trading systems (such as volume depletion, price supply-demand, long/short position funding rate, etc.) simultaneously issue a short signal at the same point (2580), creating a high-probability trading opportunity. He emphasizes that these systems must be based on different algorithms and logics (rather than mere technical indicator overlays). The current ETH trend aligns with the short conditions in multiple independent dimensions of his trading system, hence the decision to short.
Overall, Bitcoin still maintains over 54% market dominance, and institutional funds' continued preference for it may limit the altcoin's upward potential. The market's future direction will depend on multiple factors, such as Bitcoin's price trend, global macroeconomic conditions, and whether funds can effectively rotate from Bitcoin to the altcoin sector.
Although Ethereum's recent leadership in the market has brought about optimistic sentiment, investors still need to remain rational as different sectors of altcoins are likely to show divergence in trends. Whether this round of Ethereum's rise will usher in a true altcoin frenzy may require more time and conducive conditions.
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$COIN Joins S&P 500, but Coinbase Isn't Celebrating
On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.
On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.
Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.
In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.
Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.
Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.
According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.
This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.
Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.
In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.
According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.
However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.
The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.
On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.
With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.
In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.
Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.
Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.
In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.
Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.
Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.
Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.
In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.
Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.
Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.
Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.
Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.
Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.
With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.
However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.
In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.
The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.
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