On the surface: Coinbase's Q1 revenue was $2.03 billion, down 12% quarter-over-quarter, and trading revenue plummeted by 19%, failing to meet even Wall Street's 'tolerant' expectations. Weak trading volume in April has made the Q2 outlook feel like a 'rainy day forecast'. JP Morgan and KBW have directly shaved off the full-year revenue expectations, making it clear: 'Bro, the market is weak, don't be too optimistic.'
Looking deeper: This recent 'crash' isn't entirely Coinbase's fault. The crypto market in Q1 was affected by macro uncertainty (e.g., Trump's tariff policies) and asset price volatility, leading to an overall decline in trading volume. Coinbase has also stated that last year's 'Trump Bump' (crypto fever driven by Trump's election win) made the market too high, and the current pullback is normal. Additionally, the retail trading platform Robinhood also reported a 13% decline in trading revenue, indicating that Coinbase isn't the only one 'freezing', the whole market is 'putting on autumn pants'.
Point of complaint: Coinbase's trading revenue relies on market volatility and retail enthusiasm, but the crypto market is currently like an 'emotional teenager', fluctuating between euphoria and gloom. If Coinbase wants to make big money by 'collecting tolls', it might first need to give the market a bit of 'excitement'.
Extended thinking:
Short-term pressure: Low trading volume may persist into Q2, especially if macroeconomic factors (tariffs, interest rates) continue to drag. Coinbase needs to think about how to stabilize income during the 'market hibernation', such as launching new products or optimizing cost structures.
Long-term challenge: The trading model of centralized exchanges is inherently subject to market sentiment, and Coinbase needs to accelerate the diversification of income (such as the stablecoin and service businesses mentioned below), otherwise it will have to take medicine every time the market catches a cold.
2. Deribit acquisition: Is the $2.9 billion gamble worth it?
On the surface: Coinbase spent $2.9 billion ($700 million cash + $1.1 billion stock) to acquire Deribit, the world's largest crypto derivatives exchange, holding 75% of the options market share and $1.2 trillion in annual trading volume. Bernstein and Canaccord applauded, calling it Coinbase's 'nuclear bomb' in the derivatives field, which could also expand its international footprint, especially in the leveraged trading markets of Asia and Europe.
Looking deeper: This acquisition is indeed a strategic-level major move.
Derivatives are the future: The crypto market's spot trading has become 'red sea', but derivatives (options, futures) are still a 'blue sea'. Deribit's $3 billion exposure and $1 trillion trading volume have allowed Coinbase to leap from 'spot small prince' to 'derivatives overlord', especially attractive to institutional clients.
International ambition: Coinbase is already the 'big brother' in the US market, but its overseas business has always been a shortcoming. Deribit's license in Dubai and its foundation in non-US markets (especially Asia and Europe) have opened a 'global door' for Coinbase.
Hedging volatility: The low correlation between options trading revenue and spot trading can help Coinbase 'take fewer hits' during market downturns. Deribit's positive EBITDA also means this is not a 'cash-burning' acquisition, contributing profit in the short term.
Point of complaint: $2.9 billion is not a small amount, and Coinbase's cash flow (Q1 free cash flow -$183 million) is already a bit 'gasping for air'. This transaction needs to be integrated quickly; otherwise, shareholders won't be singing 'the love's support'. Moreover, Deribit's founders John and Marius Jansen pulled out right after the deal, so Coinbase needs to ensure the team handover doesn't fall apart.
Extended thinking:
Integration risk: Deribit's options platform and Coinbase's spot and futures systems need to be seamlessly integrated, achieving '1+1>2' cross-selling (e.g., pushing to institutional clients). If integration drags or there is a cultural clash, the $2.9 billion could go down the drain.
Regulatory variables: Crypto derivatives are a 'hot potato' under global regulation. The US has yet to approve crypto options, and the compliance costs in Europe and Asia are also not low. Coinbase needs to tread carefully in the regulatory fog.
Competitive pressure: Binance and OKX are also strong contenders in the derivatives market; Coinbase needs to rely on Deribit's technology and brand strength to quickly seize market share, or it may not be able to hold onto its 'global number one' throne.
3. Stablecoins and 'service' business: Coinbase's 'bulletproof vest'
On the surface: Coinbase's subscription and service revenue rose 9% to $698 million, with USDC balance exploding by 49% to $12.3 billion. 'Coinbase as a service' (custody, trading technology) is also viewed positively by analysts, becoming the 'stabilizing anchor' against trading volatility.
Looking deeper:
The counterattack of USDC: USDC's market capitalization surged to $60 billion, and the average balance in Coinbase's products increased by 49%, indicating that stablecoins are transforming from 'trading tools' to 'ecosystem cornerstones'. Especially with the support of compliance in Europe and global payment scenarios (such as small and medium enterprise accounts), the growth of USDC can bring stable and predictable revenue.
The potential of the 'service' model: Coinbase's custody and trading technology have attracted over 200 traditional financial players like BlackRock and PayPal. This 'shovel-selling' business doesn't rely on market volatility for income, and in the long run, it may be more reliable than trading revenue.
Hedging market risks: Trading revenue is like a roller coaster, while service revenue is like a 'fixed investment fund', allowing Coinbase to feel less 'heart attack' during market lows.
Point of complaint: Although USDC is strong, it is still Circle's 'beloved child', and Coinbase is merely the 'foster parent', with limited profit-sharing and control. If Coinbase wants to turn around with USDC, it needs to put in more 'hard work' in the ecosystem.
Extended thinking:
Long-term value of stablecoins: Stablecoins may be the 'killer application' in the crypto industry, especially in cross-border payments and asset tokenization (RWA). Coinbase needs to cultivate the non-trading scenarios of USDC (e.g., on-chain lending, commercial payments) to shift from a 'sub-lessor' to a 'landlord'.
Imagination of service business: Custody and technology services are becoming increasingly attractive to traditional finance, especially amid the tokenization frenzy (e.g., bonds, real estate). If Coinbase can bridge the 'on-chain + off-chain' infrastructure, it could become the crypto version of 'AWS'.
Regulatory dividends: If the US passes stablecoin and market structure legislation (analyst Colonnese mentioned this could happen this year), Coinbase's compliance advantages will be further amplified, attracting more institutional participation.
4. Wall Street's 'love-hate relationship': pessimistic in the short term, optimistic in the long term
On the surface: JP Morgan, KBW, and others have poured cold water on Coinbase's short-term revenue, with H.C. Wainwright analyst Colonnese even lowering the revenue and EPS expectations for 2025-2026 (to $7.4 billion and $9.5 billion, EPS from $3.50 to $3.05). However, long-term advocates like Bernstein and Canaccord remain optimistic, believing that the Deribit acquisition and stablecoin business are 'trump cards'.
Looking deeper:
Short-term pessimism is reasonable: The low trading volume in Q1 and macro uncertainty (tariffs, economic slowdown) have made analysts hesitant to 'paint a rosy picture'. Coinbase's 16x EV/EBITDA valuation is also not cheap, and the stock price may continue to 'sit on the cold bench' in the short term.
Long-term optimism is justified: Deribit has helped Coinbase establish a foothold in derivatives and internationalization, while USDC and service businesses provide a 'safety net'. Plus, potential loosening of US regulations (e.g., stablecoin legislation) is widening Coinbase's 'moat'.
Wall Street's division: Short-term advocates focus on financial report numbers, while long-term advocates look at strategic layouts. This reflects the inherent contradictions of the crypto industry: the coexistence of short-term market volatility and long-term structural opportunities.
Point of complaint: Wall Street analysts are arguing like 'crypto KOLs fighting each other', one side shouting 'drop to grandma's house' while the other side claims 'to the moon'. Coinbase shareholders probably need some quick-acting heart medicine to stay calm in this 'ice and fire' situation.
Extended thinking:
Valuation game: Coinbase's 16x EV/EBITDA isn't outrageous among tech stocks, but the volatility of the crypto industry makes investors sensitive to 'premium'. In the coming quarters, the integration effect of Deribit and the growth of USDC will be the 'touchstone' for valuation.
Regulatory winds: The Trump administration's 'friendly' attitude towards crypto may bring policy dividends, but tariffs and economic uncertainty could dampen market sentiment. Coinbase needs to find a balance between 'policy spring breeze' and 'macro cold snap'.
Industry positioning: Does Coinbase want to be the 'Nasdaq of crypto' or the 'Visa of Web3'? The acquisition of Deribit and service business points to the former, but the potential of USDC leans more toward the latter. The choice of strategic focus will determine its future ceiling.
5. Returning to the discussion of healthy currency: Can Coinbase help stabilize the crypto industry?
Combining the initial question (the stability of healthy currency), Coinbase's dynamics are actually an interesting entry point:
The role of stablecoins: The rapid growth of USDC indicates that stablecoins may be key for cryptocurrencies to achieve 'healthy' goals (stable accounting units, supporting capital formation). Coinbase is promoting payments and lending through USDC (e.g., USDC loans supported by Bitcoin), providing a 'stable anchor' for cross-time protocols.
Stability contribution of derivatives: Deribit's options trading can provide hedging tools for the market, reducing price volatility risk. This indirectly helps the 'last resort function' of healthy currencies (providing liquidity during crises), but it requires Coinbase to deepen and broaden the derivatives market.
Limitations of decentralization: As a centralized platform, Coinbase naturally conflicts with the idea of 'decentralization'. Its 'discretionary intervention' (e.g., adjusting fees, launching new products) during a crisis may be more flexible than DeFi protocols, but it is also more susceptible to regulatory and trust issues.
Point of complaint: Coinbase wants to be the 'central bank of the crypto world', but the USDC and Deribit in its hands are far from being a 'printing machine' and 'market rescue button'. To truly help cryptocurrencies become 'healthy', it first needs to stabilize its own financial report, rather than letting the market lead it around by the nose.
Extended thinking:
Centralization vs. decentralization: Coinbase's success may prove that centralized platforms can drive stability and capital formation better than decentralized systems in the short term. However, in the long run, decentralized adaptive mechanisms (like algorithmic stablecoins) may have more potential, and Coinbase needs to find a 'middle ground' between the two.
Industry barometer: Coinbase's financial reports and strategic movements are a 'weather vane' for the crypto industry. If its layouts in stablecoins and derivatives are successful, it could lead the entire industry towards 'healthy currency'; if it fails, it could raise further doubts about the stability of crypto.
Summary: Coinbase's 'Song of Ice and Fire'
The 'crash' of Coinbase's Q1 financial report and the 'brilliance' of the Deribit acquisition resemble a crypto version of (Game of Thrones): with both 'winter is coming' low trading and 'Mother of Dragons' strategic expansion. In the short term, market volatility and integration risks make Coinbase a bit 'shaky'; in the long term, the 'three-horse carriage' of USDC, Deribit, and service businesses might lead it to laugh last.
For investors, Coinbase now resembles a 'high Beta stock': it soars when the market is hot, and it flops when the market cools. Those looking to 'buy the dip' need to consider whether their hearts are strong enough. For the industry, Coinbase's stablecoin and derivatives layout could be an important piece of the 'healthy currency' puzzle, but it still has several hurdles to overcome before 'achieving success'.
Last complaint: Coinbase's recent operations feel like spending $2.9 billion on a 'global dream', but it first needs to survive the 'trading winter' of Q2. Wall Street analysts, please unify your statements, don't make shareholders car sick on this 'roller coaster'!