Invest in the Next Nasdaq

Invest in the next Nasdaq

For centuries, stock exchanges have been the beating heart of global finance, from the Amsterdam Stock Exchange in the 1600s to the New York Stock Exchange and London Stock Exchange today. These institutions were born out of necessity—to create trusted marketplaces for trading shares—and over time, they became the engines powering global commerce. Yet, even within this world, not all exchanges are created equal. Some rise to dominate, while others carve out regional niches or specialize in certain types of trading.

The crypto world mirrors this evolution. Exchanges like Kraken, Binance, and Coinbase are vying to be the NASDAQs and NYSEs of digital assets, each with its own approach to market dominance. Kraken, with its focus on regulatory compliance, innovative offerings, and advanced trading tools, plays a unique role in this ecosystem. Much like the regional dominance of London or Tokyo in traditional finance, Kraken has built a stronghold in Europe while expanding into emerging markets like the UAE and Japan.

But here’s where the comparison diverges: crypto exchanges are shaping a financial landscape that’s inherently global, decentralized, and driven by rapid innovation. Kraken isn’t just a venue for trading—it’s part of a broader movement to redefine what an exchange can be. With its SPDI charter and foray into banking services, Kraken is bridging the gap between traditional finance and the future of money, positioning itself not just as a marketplace but as an essential piece of the crypto infrastructure.

Just as stock exchanges became indispensable to the global economy, the question now is whether Kraken will cement its place in the foundation of the digital economy—or be overtaken by competitors in the race to the top.

Traction

Kraken has consistently grown since its founding in 2011, evolving into one of the most trusted cryptocurrency exchanges in the world. Despite the inherent volatility of the crypto market, Kraken has demonstrated resilience, expanding its user base and trading volumes over time.

• 2011: Founded by Jesse Powell and Thanh Luu, Kraken sets out to create a secure and reliable cryptocurrency exchange following the Mt. Gox hacking incident.

• 2013: Kraken launches to the public, offering trading for Bitcoin, Litecoin, euros, and US dollars. It becomes the first crypto exchange to enable fiat trading with euros and British pounds, gaining a strong foothold in the European market.

• 2019: The platform reaches 4 million registered users, solidifying its place as a leading cryptocurrency exchange.

• 2021:

  • Kraken hits a record $624 billion in trading volume, a 518% increase year-over-year, driven by the crypto market’s bull run.

  • Revenue climbs to $1.06 billion, marking its best financial year.

• 2022:

  • As the crypto market cools, Kraken’s trading volume drops to $269 billion (-57%), with revenue declining to $954 million (-10%).

  • Despite market conditions, Kraken’s user base grows to 9 million users across 190+ countries.

• 2023:

  • Trading volume decreases further to $221 billion, with revenue falling to $880 million.

  • Kraken doubles its share of U.S. spot trading volumes over 18 months, driven by a 5x increase in Pro app users, reflecting growing demand among advanced traders.

• 2024 (Year-to-Date):

  • By August 2024, Kraken’s trading volume reaches $229 billion, surpassing the combined total of 2022 and 2023, signaling a strong recovery in trading activity.

  • Based on the trading volume achieved through August 2024, Kraken’s estimated total trading volume for the full year is $343 billion, assuming the same average monthly trading pace continues for the remainder of the year. This would represent a 55% increase compared to 2023.

  Kraken’s growth has been fueled by its ability to expand its user base and geographic reach, serve advanced traders through its Kraken Pro app, and adapt to market volatility with innovative offerings. The platform now boasts over 9 million users in 190+ countries, dominating more than 50% of the EUR trading market and expanding into regions like Japan, Australia, and the UAE. The Kraken Pro app has driven significant growth in the U.S., with a fivefold increase in users over 18 months, doubling the company’s share of U.S. spot trading volumes. Despite industry-wide challenges, Kraken’s recovery in 2024, with trading volumes exceeding the totals for 2022 and 2023 combined, underscores its resilience and ability to thrive in dynamic market conditions.

Business Model

Kraken is one of the leading cryptocurrency exchanges, earning revenue primarily from trading fees while also diversifying its income through additional financial services. Here’s a simple breakdown of how Kraken generates its revenue:

1. Trading Fees

Kraken’s main source of revenue is the fees it charges on trades made through its platform. These fees depend on the type of trade and the amount being traded:

• Spot Trading Fees: For users buying or selling cryptocurrencies directly, fees range from 0.06% for high-volume traders to 0.40% for those trading less frequently.

• Basic Exchange Fees: For users using Kraken’s simpler platform, fees are higher—0.9% for trading stablecoins (cryptocurrencies tied to assets like the US Dollar) and 1.5% for other cryptocurrencies.

Additional Revenue Streams

Kraken has expanded beyond trading fees to include other income sources:

• Credit/Debit Card Purchases: Users can buy cryptocurrencies with cards, but Kraken charges a 3.75% fee plus a small fixed amount for these transactions.

• Margin and Futures Trading: Advanced traders can borrow funds to trade larger amounts or speculate on future cryptocurrency prices, and Kraken earns fees from these activities.

• Staking Rewards: Kraken allows users to earn rewards by holding certain cryptocurrencies to support blockchain networks. Although staking services in the U.S. stopped in 2023 due to regulatory issues, staking remains available in other regions.

• NFT Marketplace: Kraken’s platform lets users buy, sell, or even borrow against NFTs (digital assets like art or collectibles). The company charges a 2% fee on each transaction.

2. Fiat Currency Support

Kraken is one of the most accessible platforms for converting traditional currencies (like US Dollars or Euros) into cryptocurrency. It supports seven fiat currencies, including USD, EUR, GBP, and JPY. This broad support has made Kraken particularly strong in Europe, where it commands over 50% of the EUR trading market.

3. Financial Services

Kraken’s banking license (SPDI charter), acquired in Wyoming, allows it to expand into traditional financial services while keeping its focus on cryptocurrency. This gives Kraken the ability to offer:

• Secure storage for digital assets (custodial services).

• USD deposits and debit cards for its users.

• Payroll services, allowing users to deposit salaries directly into their Kraken accounts.

One key restriction of its banking license is that Kraken must hold 100% of customer deposits in reserve, meaning it cannot lend out user funds. While this limits revenue from lending, it ensures customers’ assets are always secure and accessible, boosting trust in Kraken’s platform.

By combining trading fees, innovative financial products, and fiat support, Kraken has built a business model that serves both beginner and advanced cryptocurrency users. This diversification helps the company stay resilient during market downturns while maintaining its reputation for security and reliability.

Opportunity

Kraken stands at the crossroads of several transformative market trends, poised to capitalize on the evolving needs of both crypto enthusiasts and traditional financial consumers. The financial services sector, fragmented into silos like lending, brokerage, crypto, and banking, often forces consumers to juggle multiple platforms for their financial needs. Kraken’s Special Purpose Depository Institution (SPDI) charter provides a unique opportunity to unify these disparate services under one roof. Unlike traditional banks, Kraken operates under a 100% reserve model, ensuring all customer funds are readily accessible at all times. Furthermore, the SPDI framework gives Kraken direct access to the Federal Reserve’s payment rails, enabling faster and cheaper transactions without reliance on third-party banking partners.

This regulatory framework allows Kraken to seamlessly integrate services like cards, bill payment, salary deposits, and trading into a single app, bridging the gap between traditional banking and crypto financial systems. By creating a unified ecosystem, Kraken can provide a superior user experience and significantly lower costs compared to competitors who lack access to the Fed’s payment infrastructure. This advantage positions Kraken as a pioneer in redefining digital finance, attracting both retail and institutional clients who demand a more cohesive financial platform.

Beyond consumer-facing innovations, Kraken has the potential to address the liquidity gap plaguing the crypto ecosystem. Much like a crypto-era JP Morgan, Kraken can use its SPDI-enabled banking structure to manage assets, conduct custodial services, and expand into lending. By providing liquidity to institutions, crypto companies, and miners—who struggle to access financing from traditional sources—Kraken could attract massive capital inflows. These offerings, coupled with Kraken’s expanding range of services like staking and NFT-based lending, further strengthen its position as a central hub for digital assets.

Kraken’s commitment to product innovation enhances its growth potential. Staying ahead of cryptocurrency trends, such as supporting Polkadot’s parachain auctions in 2021, allows Kraken to attract users seeking advanced trading opportunities. Similarly, asset tokenization, exemplified by NFTs, presents a major opportunity. While NFTs have been dismissed as speculative art during the bear market, they represent a broader shift toward tokenized ownership of real-world assets like real estate. Kraken’s SPDI structure uniquely positions it to capitalize on this trend, supporting NFT trading and integrating them into its wallet services.

Finally, the steady global adoption of cryptocurrencies underpins Kraken’s long-term potential. Ethereum’s cumulative addresses grew from 66 million in 2019 to 271 million by mid-2024, showcasing consistent user expansion despite market volatility. With nearly 70% of US millennials viewing cryptocurrencies as a fixture in their lives, Kraken’s ability to serve this growing base underscores its opportunity to thrive in an increasingly digital financial landscape.

Competition

Kraken operates in a highly competitive global market, but the dynamics of competition vary significantly by region. Unlike some of its rivals, Kraken has strategically focused on compliance, security, and services tailored to regional needs, which has helped it build trust and gain market share in key areas. The collapse of FTX in late 2022 further highlighted the importance of these attributes, as users and institutions now prioritize exchanges with transparent operations and sound financial practices.

Regional Players in the Crypto Landscape

While some exchanges dominate globally, others have carved out strongholds in specific regions:

• North America: Kraken competes directly with Coinbase and Gemini, two US-based exchanges that cater to mainstream users with easy-to-use interfaces. However, Kraken sets itself apart with its advanced trading tools, institutional offerings, and broader range of cryptocurrencies and fiat support.

• Europe: Kraken has established itself as a market leader, commanding over 50% of the EUR trading market. Its early entry into Europe and support for multiple fiat currencies like EUR, GBP, and CHF have made it a preferred choice in the region, outpacing competitors like Binance and Bitfinex in regulatory compliance and trust.

• Latin America: Regional players like Mercado Bitcoin and Bitso dominate the market by focusing on local needs such as remittances and support for local fiat currencies. While Kraken is less prominent here, its regulatory strength and broad service offerings could make it an attractive option as the market matures.

• Asia-Pacific: This region is highly fragmented, with players like Binance, OKEx, and Huobi dominating the market. Kraken’s entry into Japan and Australia demonstrates its intent to compete in the APAC region, but it faces significant challenges from established local players and varying regulatory landscapes.

• Africa: Exchanges like Yellow Card and Luno focus on Africa’s unique market needs, such as mobile money integration and low-cost transfers. Kraken’s presence in the region is still nascent but represents a long-term growth opportunity as crypto adoption increases.

Global Heavyweights

• FTX: Once a dominant player valued at $32 billion, FTX’s collapse in late 2022 due to allegations of financial mismanagement and insufficient reserves reshaped the competitive landscape. Its downfall underscored the importance of transparency and trust, areas where Kraken excels.

• Binance: The largest global exchange, Binance continues to process significant trading volume despite its market share dropping to 30% in 2024 (from 50% in 2023). Its broad range of supported tokens (415) and fiat currencies (11) make it attractive, but regulatory challenges, especially in the US, cast uncertainty over its long-term sustainability.

• Coinbase: As a US-based public company with a $55.5 billion market cap as of May 2024, Coinbase is a major competitor globally. However, its simplified interface and focus on retail users make it less competitive with Kraken for advanced traders.

Kraken’s Edge

Kraken’s regional approach and emphasis on compliance distinguish it from competitors. It has tailored its services to address specific market demands, such as its dominance in Europe’s EUR trading market and its growing institutional offerings in North America. Furthermore, Kraken’s SPDI charter gives it an edge in cost efficiency and trustworthiness, positioning it to capitalize on opportunities in emerging markets like Africa and Latin America.

As regional players continue to shape the competitive landscape, Kraken’s ability to adapt and innovate while maintaining its global reputation for security and reliability will be key to its success.

Valuation and Investor Growth

Kraken’s valuation trajectory stands out in the private market, driven by frequent secondary trading across multiple platforms since 2022. This dynamic provides investors with a unique, real-time view of share price trends while offering the added benefit of liquidity when needed. Such transparency and flexibility are uncommon in private markets, further distinguishing Kraken from its peers.

One key aspect of Kraken’s valuation is the relationship between its share price and trading volume on its platform. While Kraken has been exploring new revenue opportunities, its core business model still hinges on the frequency and volume of transactions. This makes the comparison between share price growth and transaction volume particularly important.

Historically, Kraken’s share price closely followed changes in trading volume, with the $624 billion trading peak in 2021 aligning with higher valuations. However, by late 2024 and into 2025, this relationship shifted, as share price growth began outpacing trading volume. This divergence signals that investors are increasingly valuing Kraken for its future potential rather than just its immediate operational performance. Contributors to this sentiment likely include Kraken’s SPDI-enabled financial ecosystem, innovative products, and growing foothold in key global regions.

That said, the window to invest in Kraken at a “discount” may have passed. The next surge in Kraken’s valuation could depend on several external factors, such as its ability to outmaneuver competitors, expand into untapped markets, or capitalize on broader crypto adoption. For instance, if a major competitor like Binance were to collapse under regulatory scrutiny, much like FTX did in 2022, Kraken’s current valuation could be viewed as a bargain in hindsight. Similarly, if cryptocurrencies continue to gain traction as a stable asset class amid global economic uncertainty, Kraken could emerge as a beacon of reliable growth.

This dual narrative—where Kraken balances current operational metrics with long-term potential—makes it a compelling case in the evolving crypto ecosystem.

Pros and Cons

How to Invest

Investors interested in Kraken secondaries can access the opportunity through the private secondary market. Currently, two standout options are available:

• EquityZen: Shares are priced at $20 per share with a minimum investment of $10,000.

• Hiive: Shares are available at a slightly lower price of $18 per share, though the minimum investment requirement is higher at $36,000.

Unlike many other pre-IPO companies, investing in Kraken is not constrained by a fixed window; availability depends on the offers currently open in the secondary market. This flexibility provides investors with ongoing opportunities to acquire shares as new deals emerge.

• Accredited investors only: Private market opportunities require accreditation.

• Trust the platforms: Forge and Hiive are reputable operators with a strong track record.

• Expect delays: Private market transactions can take time to close, and not every deal goes through. Don’t be discouraged—other opportunities will follow.

As always, if you want us to clarify anything in this material, shoot us an email at [email protected], and we’ll respond as soon as we can.

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