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Go Left? Go Right? The Crossroads of Cryptocurrency
The recent Libra incident has completely exposed the dark side of Crypto, once again fulfilling Plato's Allegory of the Cave. Even on the most transparent blockchain, we can only catch a glimpse of the shadows cast by the torches outside the cave. However, this Libra incident unprecedentedly revealed the outside scene to those inside the cave, creating a complex situation involving central aspects of national power, market makers, the core DeFi project on Solana, and key players in the industry.
After the event, it left behind many issues that the entire industry needs to address. Among them, Solana's core DEX, Jupiter, and Meteora were embroiled in the center of the whirlpool of this event. The joint statement released by BenChow, the co-founder of both projects, prompted a rethinking of a long-standing issue in the blockchain space—the debate between "permissioned" and "permissionless" blockchain projects, representing the two factions of blockchain. In light of this, Dapenti BlockBeats invited dForce's founder, MinDao, to discuss the reflections behind this event.
The Boundaries of "Permission"
As Jupiter and Meteora were deeply embroiled in confusion, social media was filled with discussions about their involvement in this event. DForce's founder, MinDao, stated, "The focus of the event is not on sniping but on using insider information to preemptively know about the authenticity of such events and then snipe. I don't understand why Libra chose to make such a complex setup through Meteora instead of easily issuing tokens using Uniswap."
When Ben pointed out that Meteora's DLMM pool required manual customization, the market naturally compared it to Uniswap V3's concentrated liquidity feature. The timeline goes back to the iconic vote initiated by Vitalik in 2018—over 80% of users supported "Uniswap should list freely," driving the blockchain from the ICO era to the DeFi permissionless era. Leveraging this mechanism, Uniswap once held over 80% of the DeFi market share at its peak, and its "permissionless" underlying logic still profoundly influences the industry's DeFi standards today.
During the same period of Uniswap's market dominance, Meteora quickly emerged as a prominent player in the Solana ecosystem after its launch. This was the time of DeFi Summer when all the stars aligned. However, Meteora effectively solved the slippage issue with its innovative routing algorithm, gaining a share of the DeFi market. After the team split off to create the aggregator Jupiter, the Jupiter ecosystem quickly surged ahead in market share, at one point occupying over 70% of Solana's liquidity inflows, becoming the most dominant entry infrastructure during Solana's DeFi tech boom.
Both are single-sided liquidity pools, one being the undisputed giant of the DeFi golden age, Uniswap, and the other being Jupiter, a grassroots-born underdog that rose to prominence. Despite Uniswap's 5-year history, enduring multiple bull and bear cycles, and launching countless rug tokens, it has not faced the same level of public outcry as Jupiter did in this incident. The reason behind this lies in a battle between open-source and closed-source.
Open Source or Closed Source? Ethereum or Solana?
Uniswap V3 enforces liquidity rules through mathematical formulas, with all parameters like fees and price ranges being publicly transparent and immutable. Therefore, even with single-sided liquidity, on-chain arbitrageurs can actively monitor on-chain data and conduct arbitrage to rebalance the market in real-time. This presents a high opportunity cost for projects expecting to control the market through partial price range manipulation. On the contrary, for DLMM, the project team needs Meteora's assistance to create a customized liquidity pool, a process that involves subjective judgments ("only Meteora can determine the reliability of the project team") and information asymmetry. For example, the Libra team may, under the guise of "enhancing user experience," request uncommon slippage parameters within special ranges or conceal liquidity lockup periods. These details often make it difficult for on-chain arbitrageurs to execute strategies quickly, leading to market price imbalances.
Related Reading: "Quickly Understand Meteora's Liquidity Price Range Viewing Method"
Meanwhile, the closed-source protocol and special liquidity pool settings allow celebrity tokens like $Libra to exit liquidity with ease and low risk when using Meteora DLMM. This indirectly enables teams behind malicious tokens to selectively harvest profits. According to Nansen's post-incident analysis report, among the 15,000 wallets with a PNL exceeding $1,000, 86.07% suffered losses totaling $250 million, while the remaining 2,100 wallets made profits of $180 million. Hayden, the founder of the main LP in this incident, KelsierVentures, openly stated that he profited $100 million from the trades and additionally received over $10 million in transaction fees.
In fact, even in cases where the ecosystem cannot be open-sourced or for products that require customization, there are multiple ways to avoid malicious behavior from behind-the-scenes market makers. Olympus Pro's Bond mechanism "Market Maker Collateral Requirement to Prevent Malfeasance" and Trader Joe's liquidity ledger with a time-weighted exit model "Unlocking in stages based on trading volume and survival time" can both cater to the needs of large-scale token launches and customization while protecting users.
The rapid rise of DLMM TVL post-Trump event, data from DeFiLlama
「There is no middle ground in permissionless DeFi or in running a compliant CEX」 MinDao also pinpointed the core of this, adding, 「Where is the boundary, what kind of product is called DeFi, I think we need a clear framework on this. I feel that everyone in the crypto circle is also looking for various compromises, striving towards a balance of compliance and decentralization.」
Indeed, as long as humans are involved in the process, it cannot be called DeFi "decentralized" finance, and this product will inevitably face regulatory compliance issues. Faced with this issue, even Uniswap Labs, which is completely separate from the protocol and the company entity, could not escape. The U.S. SEC once attempted to charge Uniswap Labs with operating an unregistered broker, exchange, and clearinghouse, and issuing unregistered securities. From warnings, sending a Wells Notice, investigation, to formal charges, Uniswap underwent a 3-year-long self-certification process with the SEC, forcing the team to waste a significant amount of time and millions of dollars until now, on February 26, 2025, the U.S. SEC finally dropped its investigation into Uniswap Labs. We are in a phase where traditional financial rules are being abandoned to regulate DeFi by force, and in the midst of upcoming DeFi regulations.
The Double-Edged Sword of Liquidity
The above-mentioned artificial "permission" risk is just one of the reasons for community opposition, and Meteora itself does not hold a significant market share and cannot shake the entire industry. What is truly concerning is the vertical dominance of the Jupiter ecosystem.
According to Dune data, Meteora's market share is only 5%
Starting in 2024, Jupiter began acquiring various ecosystem projects, from the user entry point Ultimate Wallet, to data analysis tool Coinhall, blockchain explorer SolanaFM, from the backend liquidity pool Meteora to the frontend Moonshot. By integrating wallet, data, and trading core infrastructure, Jupiter is building a self-contained DeFi service collection. Users can complete the entire process from depositing, trading to yield optimization within this ecosystem, and the recent launch of Jupnet indicates its intention to expand beyond Solana into the entire chain's DeFi ecosystem.
Such a powerful impact and product are like a double-edged sword. When nothing goes wrong, this is undoubtedly the best path for new users to enter the blockchain Mass Adoption, as seen from the potential demonstrated by the hundreds of thousands of non-crypto users added during the Moonshot to Trump Coin era. However, when it gets involved in an "insider trading" event, the market naturally becomes anxious about how to accept regulation for such a complex DeFi functionality and process, especially since it is tied to Solana, which currently has the largest liquidity in Crypto.
Just like the saying "everyone in the crypto world is making all sorts of compromises," the open-source Uniswap, for its own business logic, has set the shackles of the BSL "Business Source License" on V3 and V4 or has delisted some tokens from the frontend for regulatory legalization. How will the closed-source Jupiter compromise its own business blueprint and the balance between user trust and compliance?
Cultural DNA
When we extend the discussion to Uniswap and Jupiter, discussing whether ETH and Solana products have been influenced by the underlying culture of these two chains, MinDao believes that "Solana's closed-source pragmatism, pursuit of efficiency and value chain integration, is conducive to rapid expansion; while Ethereum's open-source freedom and diverse ecosystem require more considerations for development direction, and the underlying culture of the chain will profoundly influence the product's path."
In his article "Layer 2s as cultural extensions of Ethereum," Vitalik mentioned that Ethereum's underlying subculture is broadly divided into three camps: Crypto Punks, Regens, and Degens. Looking at it now, Ethereum's "crypto punk culture" is more vibrant, while the Degen culture has flourished in Solana. Ethereum leans more towards the white left, with its cultural DNA rooted in the spirit of open source and decentralized idealism, which is essentially a continuation of the BTC spirit, and its ecosystem evolution follows the logic of "common cooperation."
Ethereum core protocols like Uniswap and Aave are completely open source, allowing any developer to fork and iterate, as seen with Sushiswap forking Uniswap, forming a free-market competition. This has also led to the emergence of more niche products on Ethereum, each product excelling in its own field, with the product's moat being the "brand" itself. The speed of iteration and the solidity of the community significantly influence the project's dominance, while its development path is more horizontal.
Protocols on the EVM are mostly multichain
While Solana embraces efficiency, its culture is based on a competitive sports spirit and relentless execution, closer to Web2's "winner-takes-all" mentality. This has allowed the "Degen culture" to take root extensively in this environment. The Solana Foundation excels in proactively integrating resources such as capital and government relations, enabling them to develop at an extraordinary pace. This mindset has permeated various products on the platform, where most mainstream projects on Solana are either difficult to integrate with other chains due to the underlying technology, or choose to keep their source code closed to prevent on-chain competitors from copying them. Solana is adept at leveraging various resources to develop and prioritize creating a value chain with the highest efficiency, monopolizing the entire value chain, and controlling the interest chain, similar to Tencent's "super-app" strategy. For example, Jupiter has acquired Meteora (DEX) and Moonshot (fiat gateway) to achieve "trade-mint-liquidity," or more recently, Pumpfun announced the abandonment of Raydium to directly launch a product business adding AMM pools on Pumpfun.
Protocols on Solana are mostly single-chain
The Future of Blockchain, Ethereum to the Left, Solana to the Right
The "Liberal" Ethereum
The underlying cultures of both sides have also shaped the paths they are currently on. Firstly, environmentalist Vitalik proposed transitioning Ethereum from PoW (Proof of Work) to PoS (Proof of Stake) due to the excessive energy consumption of PoW. In September 2022, Ethereum completed The Merge, officially transitioning from PoW to PoS. Energy consumption decreased from approximately 78 TWh per year, equivalent to Chile's national electricity consumption, to about 0.01 TWh. The PoS-introduced staking mechanism with a "32 ETH threshold" and the deflationary model of EIP-1559's burning mechanism have transformed Ethereum's tokenomics. Post-merge, the circulating ETH supply decreased by 3 million, the annual inflation rate dropped from 3.5% to -0.2%, and the number of validator nodes expanded from a few thousand miners in the PoW era to over 1 million stakers.
However, this initial choice has led to a phenomenon where the PoS staking threshold of "32 ETH" restricts the participation of most ordinary users. The top three staking service providers—Lido, Coinbase, and Kraken—control over 35% of the staked amount, sparking criticisms of the market becoming "the richer getting richer." Even Ethereum core developer Dankrad Feist acknowledged that "if Lido's share exceeds 33%, it may trigger social consensus intervention." Coupled with the exorbitant GasFee, this has led to "whales" becoming the primary users of Ethereum, leading to Ethereum being known as a "noble chain."
The Ethereum Improvement Proposal (EIP) voting process is lengthy, and community consensus is difficult to quickly achieve unless driven by core members. Reports have indicated that 68% of Ethereum Improvement Proposals are implemented by 10 individuals associated with the Ethereum Foundation. However, ecosystem decision-making often gets caught up in multi-party games, leading to low efficiency in key upgrades. For example, innovations like "account abstraction" have not been fully deployed yet, and the transition to Proof of Stake (PoS) mentioned above has been ongoing for 6 years. The complementary "EIP-1559" fee burning mechanism took two years of discussion to be implemented. YBB Capital researcher Zeke believes that the EIP process has lost its original democratic intent: "Governance tokens are meaningless until the Sybil problem is solved. Democratic voting can never be reflected in proposal governance. In the current Ethereum ecosystem, similar to big institutions like a16z, a few wallets can veto a large community's approval votes, rendering the vote meaningless."
On the same day Trump announced strong support for the "American" blockchain, Vitalik tweeted that the Ethereum Foundation will avoid including: promoting any ideology, actively lobbying regulatory bodies and powerful political figures, especially in the United States or any major country, risking damaging Ethereum's status as a globally neutral platform, becoming an arena for vested interests, and becoming a highly centralized organization. Vitalik still hopes to maintain Ethereum as a digital Tower of Babel against authoritarianism, guarded by a globally open network of validators using mathematics.
The "Pragmatic" Solana
Image Source: Blockworks
In contrast, Solana, heading to the right, has gradually turned its vision of Mass Adoption through ultra-fast transaction efficiency and throughput into a reality. It has established overwhelming superiority in a blockchain, from transaction volume and activity to liquidity, making Solana a well-deserved leader. The launch of the Trump Coin can be seen as the best stress test of Solana's performance. $5.6 billion in real value was generated in a day, and half of the value was generated by outsiders who had never participated in blockchain. Polygon co-founder Brendan Farmer, however, expressed concerns about Solana's structural issues. Most of Solana's economic value is derived from pump and trading bots, forming a derivative industry of Meme coins that does not create any economic value. The consequence is that they will extract liquidity from the ecosystem. Each dollar of REV paid means a reduction in funds for future Meme coin transactions, creating a vicious cycle.
Over the past five years, Solana has experienced a total of seven independent outage events, five of which were caused by client errors and two due to the network's inability to handle a large volume of spam transactions. However, some community leaders, including Helius founder Mert Mumtaz, predict that outages will continue to occur. The exposed issue of Solana's excessive centralization was widely discussed around 2022, but as the market sentiment shifted from geek culture to an application-centric mindset, with Solana demonstrating transaction throughput comparable to Web2 networks, this issue has been of little concern to most.
Source: Helius Report on Solana Outage History
Unlike Vitalik, Lily Liu, the head of the Solana Foundation, mentioned in an interview, "We believe the new administration will recognize the role of blockchain in supporting the U.S. strategy, so we are very hopeful and have plans to collaborate with the U.S. government in the future." The Solana Foundation's excellent resource integration capabilities have shown that in this round of the market, opportunities have leaned towards Solana, from government support to even the U.S. president endorsing a memecoin. However, MinDao believes, "If Solana is too politically inclined, its politically interventionist nature will make it potentially vulnerable to political influences in the future globalized ecosystem. For example, if a Chinese company wants to issue a Layer2, they probably won't want to issue it on a chain that represents the U.S."
The Crossroads of Progress, Forward We Go
We are wandering between crossroads of left and right, seemingly facing a deadlock in Ethereum's governance gridlock and Solana's capital frenzy. However, this evolution movement that seems to "betray" its original intention may be forging the Holy Grail of a financial system that can accommodate both Hayek and Keynes.
Going left, Ethereum, after transitioning to PoS to reduce resource consumption and decrease the possibility of centralized regulation, has turned ETH into a chain for the elites. The initial intention to accept democratic voting through the EIP process has made Ethereum struggle. The ethos of being firm not to be involved in politics has also led it to lose to Solana in this round of large-scale application cycles. Even in 2024, Solana has surpassed Ethereum in ecosystem developer growth, despite Ethereum's status as a concentrated hub for ecosystem development.
The right-leaning Solana, with its high performance and cost efficiency, has rightfully become the "Liquidity King" amidst the Meme craze. However, by emitting hundreds of thousands of Meme tokens monthly, it has transformed Solana, originally envisioned as the decentralized "Nasdaq," into a perfect decentralized "casino." This situation simultaneously devours the potential value Solana could create in the future. Excessive involvement in geopolitics also limits its application on a global scale.
It seems that whichever path is taken, challenges are encountered.
Yet, MinDao remains optimistic about the left and right leanings towards "Ethereum" and "Solana." He believes that the competition between them is not a zero-sum game. The ultimate potential of blockchain is neither Ethereum's ideal state nor Solana's efficiency empire but a new species born through the confrontation and integration of both. This will undoubtedly include utilitarianism and perfect "decentralization" through a mechanism driven by economies of scale. This revolution is not a betrayal but a redefinition of the "revolution" itself.
Regarding the future path, Vitalik recently provided an answer in a Tako AMA, stating that it is no longer the era of infrastructure but the era of applications. Therefore, these stories cannot be abstract concepts like "freedom, openness, censorship resistance," etc. They require some clear application layer solutions. He proposed the concept of Ethereum as the world's finance and that it will further support application layer products such as info finance, AI + crypto, high-quality public goods financing methods, RWA, etc. Interestingly, the two factions represented by ETH and Solana are becoming more alike in their development process, akin to the obverse and reverse of a coin, the double helix of DNA. Only by transforming human game theory into a verifiable public knowledge core can blockchain evolve into a trustworthy value network.
a16z partner Chris Dixon believes that AI, the Internet, and Crypto all have their ups and downs. When we wait for things to improve before taking action, we find ourselves doing the same things as a large group. Thus, when people believe that a technology has reached its limit, it often conceals the best opportunities.
We are currently at a crossroads both horizontally and vertically. Whether we lean "left" or "right," the ultimate result will be moving forward. Perhaps the ultimate form of blockchain is neither the utopia of the "savior faction" nor the hegemony empire of the "apocalypse faction" but a hybrid that finds a dynamic balance between openness and efficiency, idealism and realism. The future belongs to those who can embed "imperfect human nature" in code yet maintain the system's robustness.
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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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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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