How Crypto Exchanges Like Coinbase Generate Revenue

Cryptocurrency exchanges like Coinbase play a pivotal role in the digital asset ecosystem. But how exactly do they turn a profit? This article breaks down their revenue models, fee structures, and liquidity dynamics—using Coinbase as a case study.

How Crypto Exchanges Earn Revenue

Exchanges primarily generate income by charging fees on trades. A simplified example:

Fee Rate: 0.10% (10 basis points) per trade.
Trade Value: $10,000 → Exchange earns $10,000 × 0.10% × 2 = $20 (2 for buyer/seller fees).

Key factors influencing fees:

Tiered Fee Structures: Volume-based discounts for high-frequency traders.
Maker vs. Taker Fees: Lower fees for liquidity providers (Makers) vs. immediate traders (Takers).

Tiered Fee Structures Explained

Exchanges incentivize volume by reducing fees for active traders. Coinbase’s tiered fees:

| Tier | Taker Fee | Maker Fee |
|-----------------|--------------|--------------|
| $0K–$10K | 60bps | 40bps |
| $10K–$50K | 40bps | 25bps |
| $400M+ | 5bps | 0bps |

👉 Compare fee structures across top exchanges

Example: A $5,000 trade costs a new user $30 (60bps) vs. $9 (18bps) for a high-volume trader.

Maker vs. Taker Dynamics

Maker: Adds liquidity via limit orders (e.g., 40bps fee).
Taker: Executes market orders (e.g., 16bps fee).
Exchange Profit: $28 on a $5,000 trade (*Alice: $20, Bob: $8*).

Some exchanges even offer negative Maker fees, paying users to add liquidity (e.g., BitMEX).

Calculating Exchange Revenue

Estimating revenue involves:

Cumulative Trade Sum: Aggregate trade volumes over time.
Fee Assumptions: Apply realistic fee ranges (e.g., 15–25bps).

Practical Example: Coinbase’s BTC-USD Revenue

Using QuestDB’s sum() OVER() function:

SELECT 
  timestamp, 
  sum(amount * price * (25+15)/10000) OVER(
    ROWS BETWEEN UNBOUNDED PRECEDING AND CURRENT ROW
  ) AS revenue 
FROM trades 
WHERE symbol = 'BTC-USD';

Outcome:

Estimated Daily Revenue (BTC-USD): $1.7M (25bps Taker, 15bps Maker).
Range: $215K (cheapest tier) to $4.4M (highest tier).

Revenue Distribution Across Trading Pairs

Normalizing fees (25bps Taker, 15bps Maker) for USD pairs:

SELECT 
  symbol, 
  sum(amount * price * 40/10000) AS revenue 
FROM trades 
WHERE symbol LIKE '%-USD' 
GROUP BY symbol;

Revenue Share:

BTC-USD: ~50%
ETH-USD: ~25%
SOL-USD: ~15%

Top 3 pairs drive 80% of USD-based revenue.

Real-Time Revenue Analysis

Compare current vs. historical data to gauge performance:

WITH weekly_data AS (
  SELECT 
    dateadd('d', 7, timestamp) AS timestamp, 
    sum(amount * price * 40/10000) OVER() AS revenue 
  FROM trades 
  WHERE timestamp BETWEEN dateadd('d', -7, systimestamp()) 
  AND dateadd('d', -6, systimestamp())
)
SELECT 
  timestamp, 
  last(revenue) AS revenue_last_week 
FROM weekly_data 
SAMPLE BY 1m;

Insight: Today’s revenue trends can be benchmarked against past weeks.

👉 Explore real-time crypto analytics

FAQs

1. What’s the average fee rate on Coinbase?

Most traders fall within 15–25bps (Maker/Taker), but rates vary by tier.

2. Why do exchanges charge lower fees for Makers?

To incentivize liquidity, ensuring tighter spreads and better trade execution.

3. How accurate are revenue estimates?

They’re approximations—actual fees depend on user tiers and trade types.

4. Which trading pairs generate the most revenue?

BTC-USD dominates, followed by ETH-USD and SOL-USD.

5. Can exchanges earn revenue beyond trading fees?

Yes, via custody services, staking, and institutional offerings.

Key Takeaways

Fee Structures: Volume-based tiers and Maker/Taker models drive profitability.
Liquidity Matters: Exchanges reward liquidity providers to maintain healthy order books.
Revenue Estimation: Public trade data + fee assumptions yield actionable insights.

For deeper analysis, leverage tools like QuestDB to query real-time market data.