Crypto Exchanges Shift Strategies, Impacting Rewards and Fees Amid Bear Market

As a persisting bear market creates challenges for trading revenues, major listed cryptocurrency exchanges are evolving into broader financial services platforms. During the second quarter, Coinbase, Bullish, and Gemini all recorded quarter-on-quarter declines in trading revenue, prompting these companies to invest more heavily in new product lines to diversify their revenue streams and reduce reliance on market fluctuations.

New Focus on Stablecoins and Prediction Markets

The gap between trading and non-trading revenues decreased across these major platforms in the second quarter. For example, Coinbase allowed its USD Coin (USDC) stablecoin rewards to grow into the third quarter, reporting that average USDC held in its products jumped 44% year-over-year to $20 billion. This expansion occurred alongside cost-cutting measures, including a 14% staff reduction in May and a $100 million reduction in full-year cost guidance.

Similarly, Gemini increased its focus on prediction markets by tripling the number of market makers to ensure consistent liquidity. The platform began paying rebates to these market-making firms and offering rewards to prediction market users, leading to a nearly doubled number of bets for the quarter.

Adjusting Trading Fees and Rewards Programs

To combat falling trading revenues, professional- and institution-focused Bullish introduced a new rewards program. Although Bullish's adjusted transaction revenue dropped 21% quarter-on-quarter to $29.9 million, it remained 24% higher compared to the same period in 2025, making it the only exchange among the three to increase trading revenue year-over-year. Bullish is also taking steps to expand its tokenized securities business.

Falling trading revenues have not uniformly worsened fee economics across the board. Gemini reported during an earnings call that fee economics continued to improve in both its retail and institutional trading segments, even as its total quarterly exchange revenue fell 27% to $12.5 million and its yearly trading volume dropped 66% to $3.8 billion. Meanwhile, Coinbase reported that its quarterly transaction revenue fell 22% to $599 million, with spot volume decreasing 35% to $146.4 billion and derivatives climbing 3% to $1,061 billion year-over-year.

Outlook on Competition and Future Markets

If a sustained asset price rally ends the current bear market, it could revive trading revenues at crypto exchanges and trim previous double-digit share losses. However, because platforms are actively trying to reduce their dependence on market volatility, users can likely expect continued rewards and incentives for utilizing new products. Furthermore, an incoming bull market could intensify fee competition as platforms race for market share, a trend further supported by the blurring lines between cryptocurrency platforms and traditional finance.