Strike, the popular app that has been helping El Salvador adopt Bitcoin, is now operating in the US. Due to this, Coinbase is facing tough competition in the sector. Strike competes with Coinbase and other companies by providing almost zero fees Bitcoin trading options. This is proving to be a very effective mechanism as Coinbase’s fees is quite high. Depending on the size and type of transaction, it can go as high as 3.99%. I am pretty sure retail investors would appreciate the low transaction costs of Strike very much.
— Dennis Parker (@Xentagz) July 1, 2021
Other companies are also seeing serious competition.
Coinbase is not the only exchange that is facing a strong threat from Strike’s low fees. Even Cash App by Jack Dorsey, CEO of Square, takes quite hefty fees. For Bitcoin purchases, their transaction cost is 0.99%-2.29% which is high but still not as much as Coinbase. Even Paypal and Venmo have high transaction fees (at 1.5% and 2.3% above $25), obviously more than Strike. But all in all, since Coinbase charges the most, they face the most competition from Strike.
The company doesn’t plan to start making profits right away. They are bringing such low fees in order to attract new users, and whatever the fees are will be used in covering spread costs and managing liquidity. The app also plans to reduce its transaction charge from 0.3% to 0.1% as its user volume grows. This is because the higher the volume, the less their liquidity partners will charge. Strike believes that it should not cost something to get your hands on open-source money, so the ultimate goal is to drive the fees to zero.
It’s not all easy for Strike
As Strike competes with Coinbase, it has come to light that the company has some licensing issues. While Coinbase has a money transfer license in over 44 states, Strike has only one that is Washington. In fact, Coinbase also says that their target and audience are different. While Coinbase is planning to add as many cryptos to their platform as possible, Strike is betting on Bitcoin and the lighting network.
Talking about the licenses, even though Strike lacks most of them, it has partnered up with a third party to help them do the same. The strike is working with Nevada Chartered trust to help them transfer money across the US. And while they are relying their business on 3rd party right now, the company is working to acquire more licenses.
What are your thoughts on Strike competing heavily with Coinbase and other apps by offering low transaction costs? And do you think that they will be able to take a significant portion of the market? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.