Written by: Babywhale, Techub News
More than a week ago, the American cryptocurrency exchange Gemini submitted a prospectus to the US Securities and Exchange Commission (SEC), planning to go public on Nasdaq. If Gemini is successfully listed, it will become the third cryptocurrency exchange to be listed in the United States after Coinbase and Bullish. However, compared to the obvious purpose of the previous two companies to embody the company's value, Gemini clearly stated the purpose of listing and financing in the prospectus: general corporate purposes and repayment of all or part of third-party debt.
Exchanges have always been synonymous with making money while lying down in the Web3 world. Previously, screenshots of an exchange issuing bonuses to all employees circulated on X, but the Winklevoss brothers, as founders, made such a business a loss year after year, which is really puzzling. Through the submitted prospectus, let's see what is the reason for Gemini's losses.
High operating costs, declining revenue
The financial report information in the prospectus shows that Gemini's revenue in the first half of 2025 was approximately $68.611 million, a year-on-year decrease of 7.6% compared to $74.323 million in the same period last year. Of course, the downward trend is not only reflected in Gemini. Coinbase's revenue in the second quarter of this year was also lower than analysts' expectations and showed a 26% decline from the previous quarter. This also means that although the price of Bitcoin in the first half of this year far exceeded that of the same period last year, the overall market enthusiasm for trading is not high.
However, Coinbase's total revenue in the first half of this year exceeded $3.5 billion, which is more than 50 times that of Gemini. That is to say, Gemini's entire 6-month revenue is only more than 3 days of Coinbase's average revenue, which can really be described as meager.
The specific composition of revenue includes transaction revenue, service revenue, and other revenue. In the first half of this year, Gemini's transaction revenue was approximately $43.771 million, a decrease of approximately 14% compared to $50.846 million in the same period last year. Gemini explained that the decline was due to the increase in trading volume on the low-fee platform and the increase in incentives for market makers, which resulted in a decrease of approximately $8.7 million compared to the same period last year, but the overall trading volume increased by 3%, reducing the absolute value of the decline to approximately $7.1 million. OTC revenue increased by approximately 17.5% to $740,000, and NFT platform Nifty revenue fell sharply by 43% to $463,000.
Service revenue recorded year-on-year growth in the first half of this year. Credit card revenue increased by 73% to $8.63 million, keeping pace with the popularity of the 'U Card' this year; staking revenue increased by 14% to $5.796 million, and custody revenue increased by 7% to $3.74 million.
In terms of overall customer service revenue, transaction revenue decreased by approximately 14% year-on-year, and service revenue increased by approximately 33.7% year-on-year. However, since transaction revenue accounted for more than 70%, overall revenue still recorded a decrease of more than 7%. In addition, in other revenue, Gemini's stablecoin GUSD also encountered a cold reception this year, and holders' redemptions caused reserve assets to shrink, and the reduction in interest-bearing assets in reserve assets also caused interest income to plummet by 38% to $4.774 million in the first half of this year.
In terms of revenue, transaction revenue and stablecoin revenue have fallen significantly. Although there has been good growth in credit cards, staking, and custody, these institutional-grade businesses have seen a significant decline in the higher-proportion 2C business. This is not good news for an exchange that is open for business.
In terms of operating costs, there is not much to analyze. Gemini still did not give up expansion and development in the case of poor company operations, which made the operating costs in the first half of this year increase by 14.4% year-on-year, of which marketing expenses increased by more than 2 times, and wages and other costs also increased to a certain extent. The only thing worth noting is that in the face of these increasing rigid expenditures, revenue is declining in the same period. Gemini's operating costs are not high, but coupled with the meager revenue situation, it continues to be in a state of loss purely in exchange operations. In recent years, the siphon effect of large exchanges has become more and more obvious, which is a considerable challenge for the development of second-tier exchanges.
Debt remains high for a long time, and cash flow is tight
Gemini did not present a balance sheet in the S-1 filing it submitted, but we can get a glimpse of it from other data.
In the list of other income and expenses, a large number of loan-related expenses and impairment provisions dragged down the profits for the period. Leaving aside the first two items in the table due to huge data differences caused by changes in cryptocurrency prices, items 4, 5, and 6 in the table all show that its liabilities have increased interest expenses due to debt-to-equity swaps or increased loan amounts and price changes. In any case, there is no obvious sign of a significant decrease in the amount of loans in the table.
Gemini's debt is not only high but also very intriguing. Throughout the entire document, Gemini's debt as of June 30 this year includes loans from the founder's two brothers' private investment company WCF and loans from Galaxy Digital (principal balance of $116.5 million). The amount of borrowing from WCF is staggering, including:
A total of 10,051 bitcoins and 133,430 ethers starting in December 2022, with an interest rate of 4% to 8% per year, currently has an outstanding amount of 4,682 bitcoins and 39,699 ethers, worth more than $600 million based on the average price on June 30.
Unsecured convertible notes issued to WCF from September 2023 to March 2024, worth $275 million, paid in cryptocurrency, with an annual interest rate of 4% to 16%, and no repayments have been made as of June 30. After the IPO, this portion of the loan can be converted into shares at a 20% discount to the IPO price.
A loan agreement was signed with WCF in May 2024, with a maximum loan amount of $275 million, and $275 million has actually been lent, with an annual interest rate of 4% to 16%, and due on June 1, 2027.
A loan agreement was signed with WCF in January 2025. The terms are basically the same as the previous agreement, with a maximum amount of $200 million, and the current remaining principal value is slightly higher than $130 million. Unlike the previous loan agreement, this part of the loan will also be converted into shares at a 20% discount to the IPO price at the time of the IPO.
Leaving aside the convertible bonds, but calculated from the value, Gemini's loan to the founders was worth more than $1.28 billion on June 30, and the total loan was close to $1.4 billion. That is to say, if Gemini maintains the first half of the year's revenue in the second half of this year, even if the revenue in 2025 is net profit, it will take more than 10 years to pay off the debt, not to mention that Gemini has been in a state of loss.
The cash flow situation is even worse. Although the first half of this year was the first time in the past two and a half years that the net cash inflow from investments exceeded the outflow of operating cash flow, the negative operating cash flow that has lasted for several years is really shocking. If a company has negative profits but healthy cash flow, we can still have some expectations for it, but continuous losses, negative cash flow, and even billions of dollars in debt, mostly owed to the founder, make the author feel that Gemini's IPO is more like a 'last resort for self-help'.
The S-1 filing submitted by Gemini is not a standard financial report, so the data that can be mined is relatively limited. Of course, there is a lot of content to be mined in the S-1 filing in addition to financial information. Readers can check it themselves, and this article will not expand on it here.
From the data disclosed in this S-1, we can understand that Gemini's main source of revenue, that is, the 2C business, has declined, and the 2B business has increased slightly but still accounts for a small proportion. Its extremely unhealthy debt structure and cash flow give the author the feeling that the Winklevoss brothers want to 'recover their investment first' through the IPO. Given Gemini's current situation, its investment value is obviously not high, but it is not completely without points worth looking forward to.
If Gemini successfully goes public and alleviates debt and cash flow problems through financing, and can continue to increase revenue from its 2B business and increase the market share of GUSD against the backdrop of promoting stablecoins in the United States, then Gemini's valuation still has some room for appreciation. Therefore, if Gemini successfully goes public, investors should pay attention to whether its financial reports after the IPO show changes in operating costs, revenue structure and absolute value, as well as debt and cash flow.
