• Coinbase quantified Tuesday just how much of a beneficiary it was from the bitcoin bull market of the last half-year
  • While income from its users and trading impressed analysts, a lingering concern was the flat nature of other business lines

Coinbase posted triple-figure gains in many of its key metrics Tuesday, disclosed with its voluntary earnings report prior to its public listing. While many analysts are impressed with the sheer amount of capital the company can earn, some are concerned that business units not directly connected to the appreciation of bitcoin’s value are laggards compared to the rest of the firm. 

“Coinbase differentiated itself through its regulatory strategy as it relates to aggressively acquiring licenses (such as NY BitLicense) in a variety of jurisdictions. This strategy allowed the company to thrive in terms of user base and income from cash transactions despite lukewarm reception in other markets, such as wallets, custody and decentralized exchanges,” said Alex Bulkin, Partner at A100X, a venture fund. 

Coinbase’s aggressive license acquisition

Nisa Amoils, one of the fund’s partners, told Blockworks that while FTX has a higher trading volume, Coinbase has far more revenue, earnings and users. Part of this growth comes from differentiating itself by aggressively acquiring licenses.

FTX founder, Sam Bankman Fried, disclosed its own earnings estimates on Twitter after Coinbase’s earnings reports, While FTX isn’t accessible to US users, the company does operate a US-friendly exchange called FTX.us that lacks FTX’s sought-after leverage features.

But the question that remains is how much of this is just from a bitcoin bull market causing retail interest in crypto? There are many casual traders that don’t have the interest in using a VPN to connect to FTX, or are intimidated by the complex user interface of many other platforms.

Coinbase’s transacting vs. verified users

One metric that raised the eyebrows of some analysts was the uneven ratio of monthly transacting users to verified users (6.1 vs. 56 million). 

“The ratio of monthly transacting users and verified users is a little concerning. But Coinbase is an old company. Since the time they started operations, a lot of people got into crypto and lost a lot of money, so they are not transacting anymore,” Sidharth Sogani, founder of Singapore-based research firm Crebaco, told Blockworks. “Remember, these are monthly transacting users. Lots of people simply aren’t everyday traders.” 

Despite Sogani’s thoughts, A100X’s partners believe the ratio difference is enough to be a concern.  

“Coinbase does not rely on fiat-crypto transactions to be profitable. They are more than half reliant on Bitcoin and tied to its price and volatility, so the expectation is that they will try to drive interest in altcoins. They will likely work to diversify their product roadmap and security tokens after the direct listing,” said Amoils. 

“The inevitable next bear market will test the company’s ability to retain users, and its significant cash reserves may reduce the impetus to pivot or expand into other markets, which might otherwise be a smart move,” added Bulkin.

Over on FTX, which has offered pre-IPO contracts for Coinbase since it announced its intent to IPO, traders didn’t seem overly enthused about the company’s earnings pushing the price of a contract down 1% to $481. Volume on the contracts, however, is low with only $324,334 trading hands in the last 24 hours. 

  • Blockworks
    Sam Reynolds is a Taipei-based reporter, covering digital assets and regulation throughout Asia. Before joining Blockworks he was an editor at Forkast News and an analyst with IDC.