Compiled by: Felix, PANews
U.S. cryptocurrency exchange Coinbase announced its Q1 financial results on May 8 local time, reporting that due to a cooling of market trading compared to the post-election surge 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 consensus estimate of $1.93. Total revenue was $2 billion, slightly below the expected $2.12 billion, and down from $2.3 billion in Q4 2024. Q1 trading revenue decreased by 19% to $1.2 billion, with trading volume down 10%.
Perhaps influenced by this news, Coinbase (COIN) shares fell 2.67% in after-hours trading, after rising 5% the previous trading day. COIN has fallen 16.83% since the beginning of the year.
Revenue
In Q1, the average volatility of cryptocurrency assets increased, with BTC reaching an all-time high in January. However, due to tariff policies and macroeconomic uncertainties, cryptocurrency prices fell in tandem with the overall market. Compared to the end of Q4, the total market cap of cryptocurrencies decreased by 19% to $2.7 trillion by the end of Q1.
In this context, Coinbase's revenue reached $2 billion, a 10% quarter-on-quarter decline; net income plummeted 94% quarter-on-quarter to $66 million, primarily affected by a $597 million pre-tax loss on its crypto asset portfolio, most of which was unrealized losses. Adjusted net profit was $527 million, with adjusted EBITDA of $930 million.
Trading revenue
Coinbase's earnings report shows that trading is its main source of revenue, accounting for over 60% of total revenue. Q1 trading revenue was $1.3 billion, a 19% quarter-on-quarter decrease. Coinbase's total spot trading volume decreased by 10% quarter-on-quarter to $393.1 billion, but outperformed the global spot market, which saw a 13% quarter-on-quarter decline. In derivatives, Coinbase's trading volume reached $803.6 billion, with a continued increase in market share.
In Q1, retail trading volume was $78.1 billion, a 17% quarter-on-quarter decrease. Retail trading revenue was $1.1 billion, a 19% quarter-on-quarter decrease, consistent with the decline in trading volume. In institutional trading, the trading volume was $315 billion, a 9% quarter-on-quarter decrease, with institutional trading revenue at $99 million, a 30% quarter-on-quarter decrease.
Aside from macroeconomic factors, the second reason for the quarter-on-quarter decline in revenue is the derivatives business. The earnings report noted that Coinbase is investing in trading rebates and incentives 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-on-quarter. The number of transactions on Base increased by 16% quarter-on-quarter, but the average revenue per transaction decreased by 21%.
Subscription and service revenue
Q1 subscription and service revenue was $698 million, a 9% quarter-on-quarter increase, mainly due to growth in stablecoin and Coinbase One revenue, with USDC market cap reaching a historical high of over $60 billion. However, blockchain reward revenue decreased by 9% quarter-on-quarter, partially offsetting this growth. The decline was primarily due to a quarter-on-quarter drop in average asset prices, particularly for ETH and SOL.
Q1 stablecoin revenue grew 32% quarter-on-quarter to $298 million. Coinbase noted that this growth was partially offset by lower average interest rates. The average holding of USDC in Coinbase products increased by 49% quarter-on-quarter to $12.3 billion.
Other subscription and service revenue amounted to $141 million, a 5% quarter-on-quarter increase. The number of subscription users for Coinbase One reached a record high in Q1, and the Coinbase One Premium service ($300 per month) also saw growth.
Expenditure
Total operating expenses in Q1 were $1.3 billion, a 7% quarter-on-quarter increase or $91 million, mainly due to increased volatility-related expenses from market activity at the beginning of the quarter and losses on crypto assets held for operations. Combined technology and development, general and administrative, and sales and marketing expenses increased by $40 million, a 4% quarter-on-quarter increase, primarily 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-on-quarter to 3,959.
Trading fees were $303 million, accounting for 15% of net income, a 4% quarter-on-quarter decrease. The decline was mainly due to reduced customer trading activity and lower blockchain reward fees associated with declining average asset prices.
Technology and development expenses were $355 million, a 4% quarter-on-quarter decrease. The decline was primarily due to reduced personnel-related costs, despite an increase in total headcount. General and administrative expenses were $394 million, a 9% quarter-on-quarter increase, mainly driven by higher customer support and personnel-related costs. Sales and marketing expenses were $247 million, a 10% quarter-on-quarter increase.
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 the expected growth in stablecoin revenue will be offset by a decline in blockchain reward revenue due to falling asset prices; trading fees are expected to account for about 15% of net income; and technology and development, as well as general and administrative expenses, are expected to 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 subject to regulatory approval and other customary closing conditions, expected to be completed by the end of the year. Last year, Deribit's open interest exceeded $30 billion, with trading volume over $1 trillion.
Coinbase CFO Alesia Haas stated during the earnings call: "We expect Derebit to immediately enhance our profitability and diversify and sustain our trading revenue."
Additionally, Coinbase CEO Brian Armstrong stated in an investor conference call that the company would launch a pilot project this quarter allowing businesses to use stablecoins for payments and expenses.
