It took time for equity trading fees to fall from exorbitant to expensive, expensive to zero. A similar pricing cycle may be happening in the crypto world, albeit at a quicker pace.

Binance.US, a U.S. crypto company that keeps the better-known Binance at arms’ reach, announced this week that it was cutting trading fees for certain bitcoin trading pairs to zero. The move made waves because the market for facilitating crypto trades for fee-based income has built some incredibly large businesses.

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In the wake of the Binance.US news, shares of U.S. crypto exchange Coinbase lost 9.7% of their value during regular trading on Wednesday.

What feels notable at this juncture is that it appears the market did not anticipate the directional move by a U.S. exchange to lower its aggregate fee profile and reduce some trading emoluments to zero. But the writing has been on the wall for some time when it comes to trading fees; Binance.US is merely continuing a longer trend.

Fees go down

Coinbase built a large company on the back of consumer trading fees.

Per the company’s Q1 2022 earnings report, retail and institutional traders had about the same amount of crypto assets on Coinbase, with $123 billion and $134 billion, respectively. But while their assets on Coinbase were similar, institutional trading volume was far greater, totaling $235 billion in the first quarter, compared with just $74 billion in retail trading.

So Coinbase made more money from institutional traders than retail activity, yeah? Nope.

The opposite, in fact. Coinbase retail transaction revenue was $965.8 million in Q1 2022, while institutional activity was worth a far smaller $47.2 million. More simply, Coinbase eats off of retail traders paying fees to buy and sell digital assets. (This morning, Coinbase announced a shake-up to its consumer trading business, but with the company saying that its new service will offer “the same volume-based fees as Coinbase Pro,” it isn’t clear what impact the change will have on the company fee posture.)

This is why the move by Binance.US to cut certain bitcoin trading fees to zero matters — bitcoin made up 25% of Coinbase transactional revenue in Q1 2022, up from 16% in Q4 2021. The smaller exchange is attacking the place where Coinbase makes its living.