how-does-gemini-make-money

How does Gemini make money?

  • Gemini is a cryptocurrency exchange where users buy, sell, and store digital assets such as bitcoin. It was first announced in 2013 by brothers Tyler and Cameron Winklevoss after observing that similar platforms were unsafe or unregulated.
  • Gemini has a diverse revenue generation strategy that is nonetheless typical of a cryptocurrency exchange. Most revenue comes from transaction fees that vary according to order volume.
  • Gemini also charges transfer fees, interchange fees, and money that it earns by lending out cryptocurrency to certain borrowers. The company also charges a 0.4% fee for its custodial services.

Origin story

Gemini is a cryptocurrency exchange registered in the state of New York where users can buy, sell, and store digital assets such as bitcoin. It was first announced in 2013 by brothers Tyler and Cameron Winklevoss.

The Winklevoss twins are famous for coming up with the idea of Facebook at Harvard University and having it stolen by fellow student Mark Zuckerberg.

Using some of the $65 million they received in compensation, the twins started investing in cryptocurrency around 2012.

But, at the time, they noticed there were very few safe and trusted places to do so.

Many exchanges were used to launder money, while others such as Mt. Gox filed for bankruptcy after most of its bitcoin was stolen by hackers.

Gemini was then born out of a desire to create a safe, easy, and regulated way for everyday consumers to invest in bitcoin and other cryptocurrencies.

The brothers’ total purchases of bitcoin over the years had allowed them to own 1% of all bitcoin in circulation and, in the process, they became advocates of cryptocurrency in general.

But as revolutionary as the twins believed Gemini to be, it was not above financial regulation.

After a year or so of wrangling with New York state authorities, Gemini was finally unveiled to the public in October 2015.

The initial response to the platform was lackluster since Gemini charged fees to both the makers and takers in a transaction.

A change in fee structure helped grow the user base in 2016, with bitcoin’s bull run in 2017 accelerating growth.

Today, Gemini offers a diverse range of products including credit cards, trading accounts, digital wallets, pay facilities, and the ability to earn interest on crypto balances.

The platform raised $400 million in November 2021 as part of its first outside financing round to be worth around $7.1 billion.

Gemini revenue generation

Gemini has a diverse revenue generation strategy consisting of transaction, transfer, interchange, interest, and custodial fees.

Let’s now explain these in more detail.

Transaction fees

Most Gemini revenue comes from transaction fees that the company charges for facilitating trades on the exchange. On mobile, there is 99 cent fee for any order amount under $10. This increases to $1.99 for trades between $25-50 and 1.49% for trades over $200.

Gemini also collects maker and taker fees for any order that is placed by more sophisticated traders using its API or ActiveTrader tools.

Here, fees are variable. The more trades a user places, the more the fees decrease.

Transfer fees

Deposit and withdrawal fees are also applicable for moving money into and out of a user’s Gemini account.

Cryptocurrency and Gemini dollar deposits are free, as are wire transfer deposits. Debit card transfers, on the other hand, attract a 3.49% fee.

Withdrawal fees are more variable and depend on the type of customer and token involved.

Interchange fees

As noted earlier, Gemini offers a credit card to enable customers to make real-world purchases. 

This allows the company to earn interchange fees, which are paid by the participating merchant and then split between Gemini and the card issuer MasterCard.

Interest

Gemini customers can also earn interest on the crypto balance and even lend it out to others. To make money in this scenario, Gemini lends out this balance to borrowers who then pay interest on those loans.

In conjunction with lending partner Genesis Global Capital, the two companies split and then pocket the difference between the interest rate paid by the borrower and the interest rate Gemini must pay to its customers.

Custody fees

Gemini offers custodial services for its more exclusive clients and can store over 50 different tokens including Bitcoin and Ethereum.

The custody fee is 0.4% of the total balance, with a $125 fee for administrative withdrawals.

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