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Opinion: How FTX Is Leaving Coinbase in the Dust

FTX is outpacing all of its competitors—not least Coinbase. Chris Williams explains why the fast-rising exchange could win in the long run.

Opinion: How FTX Is Leaving Coinbase in the Dust
Photo: Lam Yik/Bloomberg, Coinbase, FTX

Key Takeaways

  • FTX has become one of the world's biggest cryptocurrency exchanges in under three years.
  • At the same time, Coinbase has continually listed dubious projects and faced internal issues and product failures.
  • FTX CEO Sam Bankman-Fried is one of the key reasons for the exchange's success.

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While FTX clearly has its sights set on expansion, Coinbase is lagging in many areas.

FTX and Coinbase Compared

Regardless of when you came into crypto, you probably remember the first time you bought some. When I first read about Ethereum, I signed up to Coinbase to buy ETH almost immediately after. It became my platform of choice for stacking ETH thereafterat least until DeFi and stablecoins arrived. The experience of buying crypto on Coinbase has always been smooth for me and I’ve never had any complaints (having said that, I did use Coinbase over Coinbase Pro for an embarrassingly long time, meaning I got burned paying through the nose on avoidable fees). 

I’m grateful that Coinbase provided an onramp for me into something that would change my lifeand worldviewforever. Still the biggest crypto exchange in the U.S., Coinbase is an astonishingly successful company; its $86 billion valuation on Nasdaq last year proved this. But while Coinbase has done well out of the recent crypto boom, it’s starting to lose its stronghold among the crypto exchange titans. While Binance remains top dog and Coinbase isn’t far behind, the fastest growing cryptocurrency exchange in 2021 was a company that launched barely three years ago. These days, you can find its name on Miami Heat’s home court. It’s called FTX. 

I spend a lot of time reading about FTX’s Herculean marketing efforts, and for good reason: the fast-rising exchange has blown all of its competitors out of the water when it comes to spreading brand awareness. Besides the $135 million Miami Heat deal, FTX has also enlisted people like Tom Brady and Gisele Bündchen as partners in a clear bid to attract mainstream interest. It’s also scored a number of winning goals beyond the sports world. 

Most recently, FTX added support for Ethereum’s top Layer 2 solution, Arbitrum. For some unknown reason, Coinbase is yet to make a Layer 2 move and seems more focused on listing complete trash aimed at people who don’t know any better; only a day before FTX added Arbitrum, it added support for a dubious project called Pawtocol. Before that, FTX bought Liquid in what will probably be one of several big acquisitions it makes this year. And when meme stocks were all the rage and Wall Street Bets was dominating headlines, FTX’s agile team responded by listing GameStop stocks and silver futures. It also offered lumber futures as the wood market entered a mania phase last year. It was able to do this partly because of loose regulatory restrictions: unlike Coinbase, FTX’s main arm isn’t based in the U.S. (the firm is currently headquartered in the Bahamas). 

FTX also has a far smaller team than Coinbase. At the helm of it is Sam Bankman-Fried, the guy who traded his way to becoming the richest under 30-year-old in the world and helped Solana become a top five coin last year. Bankman-Fried is a cult-like figure in crypto, and his reputation is such that there are memes about his shoelaces and office beanbag (he often sleeps on the FTX floor rather than going home so that he stays in a work headspace). Bankman-Fried memorably made a $5 million donation to Joe Biden’s presidential campaign, and I suspect he’s a big reason for the absurd amount of capital the exchange has raised over the last few months. FTX is currently valued at $32 billion. 

Coinbase, meanwhile, hasn’t had quite the same success of late. Yes, it went public last year in what was described as a watershed moment for the industry, but that was the high point. Internal politics over the Black Lives Matter movement in 2020 resulted in a widely-shared hit piece in The New York Times, and Brian Armstrong responded by publishing a divisive blog post about how politics can cause distractions. He announced that the company would remain laser-focused on its mission as “#OneCoinbase.” A bunch of employees left over the debacle and Coinbase was left paying out generous severance packages. Unlike FTX, Coinbase employs over 1,000 people, so maybe these kinds of clashes were inevitable. 

It’s faced other issues, too. While the world’s biggest exchange, Binance, has always done its best to evade regulators, Coinbase has proudly taken the opposite approach. But that backfired last year when the SEC screwed the company over on its Lend product, warning that its fixed 4% interest rate on digital assets could constitute a security. Coinbase canned Lend shortly after. When it caught onto the NFT boom later than most of its competitors, it promised an NFT marketplace geared toward social engagement by the end of 2021, but it’s still nowhere to be seen. Coinbase NFT has since been spotlighting various NFT projects through its Twitter page, at times picking out odd (and dare I say, out of touch) choices like MekaVerse, which was easily one of the worst NFT projects of 2021. 

There’s one more obvious point I’ve barely touched on. FTX has the cleanest user experience of all the major crypto exchanges, and it doesn’t rinse you on fees like Coinbase does. That fact alone has convinced many traders to move over (admittedly, Coinbase is still the go-to exchange for many big players, which is a direct result of the company targeting whales through its Coinbase Institutional products). It’s particularly good for derivatives, which explains why it does about $12 billion in daily volume.

What more needs to be said? Nothing is constant in life, not least in crypto. Just as Ethereum may one day flip Bitcoin, and Solana or some other Layer 1 may one day flip Ethereum, don’t be surprised to see FTX overtake Coinbase—and perhaps even Binance—in the future. Hell, on practically every metric besides spot trading volume, it already has. 

Disclosure: At the time of writing, the author of this feature owned ETH and several other cryptocurrencies. 

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