Editor: Felix, PANews
U.S. cryptocurrency exchange Coinbase reported its Q1 earnings on May 8 local time, stating that due to a cooling off in market trading following the increase after the U.S. elections in the previous quarter, both revenue and net profit fell short of expectations.
As of March 31, adjusted net profit was $527 million. Earnings per share were $0.24, below the market expectation of $1.93. Total revenue was $2 billion, slightly below the expected $2.12 billion, and lower than the $2.3 billion in Q4 2024. Q1 trading revenue decreased by 19% to $1.2 billion, with trading volume down by 10%.
Perhaps influenced by this news, Coinbase (COIN) shares fell by 2.67% in after-hours trading after rising 5% the previous trading day. COIN has fallen by 16.83% since the beginning of the year.
Revenue
In Q1, the average volatility of cryptocurrency assets increased, with BTC hitting a historical high in January. However, due to tariff policies and macroeconomic uncertainties, cryptocurrency prices fell in sync with the overall market. Compared to the end of Q4, the total market capitalization of cryptocurrencies decreased by 19% by the end of Q1 to $2.7 trillion.
In this context, Coinbase's revenue reached $2 billion, a 10% decrease quarter-over-quarter; net income plummeted 94% quarter-over-quarter to $66 million, primarily influenced by a pre-tax loss of $597 million on its crypto asset portfolio, most of which was unrealized losses. Adjusted net profit was $527 million, and adjusted EBITDA was $930 million.
Trading revenue
Coinbase's earnings report shows that trading is its primary source of revenue, accounting for over 60% of its total revenue. Q1 trading revenue was $1.3 billion, a 19% decrease quarter-over-quarter. Coinbase's total spot trading volume decreased by 10% quarter-over-quarter to $393.1 billion, but outperformed the global spot market, which saw a 13% decline in trading volume. In derivatives, Coinbase's trading volume reached $803.6 billion, with a continued increase in market share.
Of this, Q1 retail trading volume was $78.1 billion, a 17% decrease quarter-over-quarter. Retail trading revenue was $1.1 billion, a 19% decrease, consistent with the decline in trading volume. In institutional trading, the institutional trading volume was $315 billion, a 9% decrease quarter-over-quarter, and institutional trading revenue was $99 million, a 30% decrease.
Aside from macroeconomic influences, the second factor for the quarter-over-quarter decline in revenue was the derivatives business. The earnings report mentioned that Coinbase is investing in trading rebates and incentive programs to build liquidity and attract customers. These rebates and rewards have been deducted from institutional trading revenue.
Other trading revenue
Q1 other trading revenue was $68 million, unchanged quarter-over-quarter. The number of trades on Base increased by 16% quarter-over-quarter, but the average revenue per trade declined by 21%.
Subscription and service revenue
Q1 subscription and service revenue was $698 million, a 9% increase quarter-over-quarter, primarily due to growth in stablecoin and Coinbase One revenue, with USDC market capitalization reaching a historic high of over $60 billion. However, blockchain rewards revenue decreased by 9% quarter-over-quarter, partially offsetting this growth. The main reason for the decline was a decrease in average asset prices quarter-over-quarter, particularly for ETH and SOL.
Q1 stablecoin revenue increased by 32% quarter-over-quarter to $298 million. Coinbase stated that this growth was partially offset by lower average interest rates. The average holdings of USDC in Coinbase products increased by 49% quarter-over-quarter to $12.3 billion.
Other subscription and service revenue was $141 million, a 5% increase quarter-over-quarter. The number of subscribers for Coinbase One reached a historic high in Q1, and Coinbase One Premium service (at $300 per month) also saw growth.
Expenditure
Q1 total operating expenses were $1.3 billion, a 7% increase quarter-over-quarter, or $91 million, primarily due to increased variable costs from heightened market activity at the beginning of the quarter and losses from crypto assets held for operations. Expenses for technology and development, general and administrative, and sales and marketing collectively increased by $40 million, a 4% increase quarter-over-quarter, mainly due to increased marketing spending (including performance marketing and USDC rewards) and higher customer support costs. By the end of the quarter, Coinbase's full-time employees increased by 5% quarter-over-quarter to 3,959.
Trading fees were $303 million, accounting for 15% of net income, a 4% decrease quarter-over-quarter. The decline was mainly due to reduced customer trading activity and lower blockchain rewards expenses related to decreased average asset prices.
Technology and development expenses were $355 million, a 4% decrease quarter-over-quarter. The primary reason for the decline was a reduction in personnel-related expenses despite an increase in total staff. General and administrative expenses were $394 million, a 9% increase quarter-over-quarter. The growth was mainly due to increased customer support and personnel-related costs. Sales and marketing expenses were $247 million, a 10% increase quarter-over-quarter.
Outlook
In April, Coinbase's total trading revenue was approximately $240 million. Coinbase expects Q2 subscription and service revenue to be between $600 million and $680 million, as expected growth in stablecoin revenue quarter-over-quarter will be offset by a decline in blockchain rewards revenue due to falling asset prices; trading fees will account for around 15% of net income; and technology and development as well as general and administrative expenses will be between $700 million and $750 million.
It is worth mentioning that Coinbase is focusing on the derivatives market, announcing its acquisition of Deribit, the world's largest Bitcoin and Ethereum options exchange, for $2.9 billion, which includes $700 million in cash and 11 million shares of Coinbase common stock, subject to customary purchase price adjustments. This transaction is still pending regulatory approval and other customary conditions, expected to close by the end of the year. Last year, Deribit's open contracts exceeded $30 billion, with trading volume surpassing $1 trillion.
Coinbase CFO Alesia Haas stated during the earnings call: “We expect Deribit to immediately enhance our profitability and increase the diversity and persistence of trading revenue.”
Additionally, Coinbase CEO Brian Armstrong stated during the investor conference call that this quarter, Coinbase will launch a pilot program allowing businesses to use stablecoins for payments and expenditures.
Related reading: $2.9 billion record merger: Coinbase acquires options king Deribit, bringing major changes to the crypto derivatives market
