CRYPTO MOVERS AND PRICES
The Top 10 cryptocurrencies were marginally higher this morning. Spot volumes are about 60% of the 30-day average.
Crypto Story of the Day
Coinbase has published Q1 2021 estimated results and an outlook for 2021 as the exchange moves towards an April 14 listing. Coinbase's impressive results rely heavily on trading revenue, but normalized performance, accounting for bear & quiet markets, is unclear.
According to Coinbase, the exchange is estimated to have 56 million verified users in the first quarter of 2021. A total of USD 223 billion-worth of crypto assets was held on the exchange for the period, while trading volume in the quarter came in at USD 335 billion.
Total revenue is reported as USD 1.8 billion, net income totals USD 730 million to 800 million, while EBITDA totaled USD 1.1 billion. For comparison, according to Coinbase’s S-1 registration statement, the exchange saw a net income of USD 322 million on net revenue of USD 1.27 billion for all of 2020, which represented a doubling of the exchange’s 2019 revenue.
Coinbase’s S-1 also shows the firm saw USD 1.04 billion in revenue from retail transactions out of a total revenue of USD 1.27 billion, or 81%, in 2020. Coinbase’s holdings of roughly 6,840 BTC, 34,500 ETH, and other currencies worth USD 316.1 million on December 31 2020, contributed about USD 296 million to the exchange’s total revenue, or 16%.
In the release, Coinbase also provides an outlook for the year beyond Q1 via the number of “monthly transacting users” (MTUs), defined as users who use more than 1 product on the platform within a 28-day period. Coinbase reported having 6.1 million MTUs in Q1 and provides 3 scenarios for 2021 annual average MTUs: high, 7 million MTUs; mid, 5.5 million MTUs; and low, 4 million MTUs.
Coinbase notes that “transaction revenue currently [fluctuates], potentially materially, with [BTC] price and crypto asset volatility,” and describes its future revenue as unpredictable.
In the past, Coinbase’s revenue has been closely tied to broader crypto market conditions. For example, Coinbase’s revenue in 2017, a year that saw BTC reach at-the-time record highs just under USD 20,000, totaled USD 927 million. In 2018, its revenue was 520 million.
Coinbase has emerged as the leading U.S.-based exchange. It offers a diverse range of services that cover trading, custody, staking, and payments. However, Coinbase’s S-1 shows that the venue has seen the vast majority of its revenue tied to trading.
Coinbase admittedly launched “subscription products and services” in order to reduce the correlation between customer use of the platform and volatility. However, Coinbase’s S-1 notes that MTUs “have remained correlated with the price of Bitcoin,” despite the launch of non-trading products. Moreover, the additional representation of crypto price growth in revenue further ties the performance of the firm to broader crypto market performance.
Coinbase has clearly established a mandate to smooth out revenue through market cycles. That said, the current state of the business appears highly beta-oriented.