In-depth Analysis of Coinbase's Transition to an "All-in-One Exchange"

Author: Thejaswini M A

Original Title: Coinbase’s Walled Garden

Translation and compilation: BitpushNews

In different industries, different eras, and every market that has existed, there is a recurring pattern. First is explosive growth: a blooming of options, with each participant claiming they can do a better job than others at a specific task. Experts surge, and tools multiply exponentially. Consumers are told “choice is freedom,” “customization is power,” and the future belongs to disruptors dismantling monolithic giants.

Then, silently, the pendulum inevitably swings back.

This is not because the experts are wrong, nor because the giants are particularly good. It’s because fragmentation carries an invisible compound cost. Every additional tool means another password to remember, another interface to learn, another potential failure point in the system you are responsible for maintaining. Autonomy begins to feel like “working for someone else,” and freedom starts to seem like an “administrative burden.”

In the integration phase, the final winners are not those who do everything perfectly. They are those who do enough things well enough to make the friction cost of leaving (and rebuilding the entire system elsewhere) insurmountable. They don’t lock you in with contracts or lock-in periods. They lock you in with convenience. Through countless subtle integrations and tiny efficiency gains, these small advantages, while not worth sacrificing for any single one, together form a moat.

We have seen this in e-commerce before. It has happened in cloud computing, in streaming media. Now, we are witnessing it unfold in finance.

Coinbase has just made a bet on the cycle phase we are entering.

Background Review

For most of Coinbase’s existence, its positioning was clear. It was the place Americans bought Bitcoin without worrying they were engaging in some vague criminal activity. It held regulatory licenses, had a clean interface, and at least theoretically, customer support—though often criticized. In 2021, the company went public with a valuation of $65 billion, based on the logic that it is the “gateway to cryptocurrency.” For a time, this logic held.

But by 2025, “being the gateway to crypto” started to look like a bad business. Spot trading fees were being squeezed. Retail trading volume showed sharp cyclicality: soaring in bull markets, crashing in bear markets. Bitcoin maximalists grew more accustomed to using self-custody wallets. Regulators still sued the company. Meanwhile, Robinhood, which started in stock trading and entered crypto, suddenly reached a market cap of $105 billion, nearly double Coinbase’s.

In Coinbase’s 2021 revenue, over 90% came from trading commissions. By Q2 2025, that proportion had fallen below 55%.

Therefore, Coinbase did what a core product under pressure should do: it tried to become “everything else.”

The “All-in-One Exchange” Hypothesis

The so-called “Everything Exchange” hypothesis is a gamble: aggregation over specialization.

• Stock trading means users can now react to Apple’s earnings with USDC at midnight without leaving the app.
• Prediction markets mean they can check the “Will the Fed cut rates?” price over lunch.
• Perpetual contracts mean they can leverage their Tesla position 50x on a Sunday.

Every new feature module is another reason to open the app, and another opportunity to capture spreads, fees, or interest on idle balances.

Is this strategy “becoming Robinhood,” or “ensuring our users never need Robinhood”?

In fintech, there’s an old adage: users want specialized apps. One for investing, one for banking, one for payments, one for crypto. Coinbase bets on the opposite conclusion: once you complete KYC (identity verification) and link a bank account, you don’t want to do nine more of the same elsewhere.

This is the argument of “aggregation over specialization.” In a world where underlying assets increasingly become tokens on the blockchain, this makes perfect sense. If stocks are tokens, prediction market contracts are tokens, Meme Coins are tokens—why shouldn’t they all be traded in the same place?

The mechanical logic is: you deposit USD (or USDC), you trade everything, you withdraw USD (or USDC). No cross-chain transfers between platforms, no minimum balances across multiple accounts. Only one pool of funds flowing between asset classes.

The Flywheel Effect

The more Coinbase resembles a traditional broker, the more it needs to compete on traditional broker terms. Robinhood has 27 million funded accounts, while Coinbase has about 9 million monthly active traders. The competitive difference can’t just be “we also have stocks,” but must be rooted in the underlying architecture (Rails).

Its promise is to provide 24/7 liquidity for everything. No market hours, no settlement delays. When the market moves against you, no need to wait for broker approval of your margin request.

Is this important to most users? Probably not right now. Most don’t need to trade Apple stock at 3 a.m. on Saturday. But some do. If you are the platform that makes that possible, you gain their Flow. Once you have Flow, you have data. With data, you can build better products. Better products attract more Flow.

It’s a flywheel, provided it can turn.

The Prediction Market Game

Prediction markets are the most unusual part of this “big package,” perhaps also the most important. They are not traditional “trading,” but organized bets on binary outcomes: Will Trump win? Will the Fed raise rates? Will the Lakers make the playoffs?

Contracts disappear after settlement, so there are no long-term holders. Liquidity is event-driven, meaning it is explosive and unpredictable. Yet platforms like Kalshi and Polymarket saw their November monthly trading volume surge past $7 billion.

Why? Because prediction markets are social tools. They are a way to express opinions with chips. They are the reason you check your phone during the fourth quarter of a game or on election night.

For Coinbase, prediction markets solve a specific problem: engagement. When prices are flat, crypto becomes boring. When your portfolio just sits there, stocks become boring too. But there will always be events people care about. Integrating Kalshi gives users a reason to stay in the app even when Bitcoin is stagnant.

This bet assumes: users coming for election markets will stay to trade stocks, and vice versa. More surface area for features means higher user stickiness.

The Core of Business Model: Profitability

Beyond the narrative of innovation, what you really see is a company trying to monetize the same user in multiple ways:

• Trading fees from stock transactions
• Spreads from DEX (decentralized exchange) swaps
• Interest on stablecoin balances
• Lending fees from crypto collateral loans
• Subscription revenue from Coinbase One
• Infrastructure fees from developers using the Base blockchain

This is not a critique. This is how exchanges operate. The best exchanges are not the lowest fee, but those users can’t leave—because leaving means rebuilding the entire system elsewhere.

Coinbase is building a walled garden, but the walls are made of “convenience,” not forced lock-in. You can still withdraw your crypto, you can still transfer stocks to Fidelity. But you might not do so, because why bother?

Base: The Real Killer App

Coinbase’s advantage should lie in its “on-chainization.” It can offer tokenized stocks, instant settlement, and programmable funds. But currently, its stock trading looks just like Robinhood’s—only extended in time; its prediction markets look like Kalshi’s—only embedded in different apps.

The real differentiation must come from Base—the Layer 2 blockchain built and controlled by Coinbase. If stocks truly move on-chain, if payments truly use stablecoins, if AI agents start trading autonomously with x402 protocols—then Coinbase will have built something Robinhood can’t easily copy.

But that’s a long-term story. In the short term, competition hinges on which app is most sticky. Adding more features does not necessarily increase stickiness. It can also make the app cluttered and confusing, pressuring new users who just want to buy some Bitcoin.

Scale vs. Purity

Some crypto users will hate all this: the true believers. Those who want Coinbase to be a gateway to DeFi, not a centralized “super app” with some DeFi features buried in submenus.

Coinbase has clearly chosen scale over purity. It wants 1 billion users, not 1 million purists. It aims to be the default financial platform for the masses, not an exchange favored by those running their own nodes.

This may be the right business decision. The mass market doesn’t care about decentralization. It prioritizes convenience, speed, and avoiding economic loss. If Coinbase can deliver these, the underlying philosophy doesn’t matter.

But it does create a strange tension. Coinbase tries to be the infrastructure of the on-chain world, while also being a centralized exchange competing with Schwab; it aims to be a defender of crypto, yet also a company committed to making crypto “invisible.” It wants to appear rebellious, yet comply with regulations.

Maybe this can work. Maybe the future is a regulated exchange that feels like using Venmo. Or perhaps, trying to serve everyone ultimately means you have nothing special for anyone.

That’s the Amazon strategy. Amazon is not the best bookstore, not the best grocery store, not the best streaming service. But it’s “good enough” in all these areas that most people don’t bother going elsewhere.

Many companies have tried to build a “super app,” but most only created a cluttered app.

If Coinbase can dominate the full loop of “earn, trade, hedge, lend, pay, cycle,” then being slightly worse at individual functions than specialized competitors becomes irrelevant. Switching costs and the hassle of managing multiple accounts will keep users within the ecosystem.

That’s the essence of Coinbase’s “all-in-one exchange.”