Original Title: “In-depth Analysis of Coinbase Q1 Financial Report: Net Profit Falls 94% Under the Impact of Portfolio Unrealized Losses, Acquisition of Deribit Makes a Strong Push in Derivation”
Original author: Felix, PANews
The American cryptocurrency exchange platform Coinbase announced its first-quarter (Q1) financial report on May 8 local time. Due to a cooling in market trading compared to the rise after the previous quarter’s U.S. elections, both revenue and net profit fell short of expectations.
As of March 31, the adjusted net profit was $527 million. Earnings per share were $0.24, below the market expectation of $1.93. Total revenue was $2 billion, slightly lower than the expected $2.12 billion and below the $2.3 billion in Q4 2024. Q1 trading revenue fell 19% to $1.2 billion, with trading volume down 10%.
Affected by this news, Coinbase (COIN) stock price fell 2.67% in after-hours trading, while it rose 5% in the previous trading day. COIN has dropped 16.83% since the beginning of this year.
income
In Q1, the average volatility of cryptocurrency assets increased, with BTC reaching an all-time high in January. However, affected by tariff policies and macroeconomic uncertainties, cryptocurrency prices fell in tandem with the overall market. Compared to the end of Q4, the total market capitalization of cryptocurrencies decreased by 19% at the end of Q1, to $2.7 trillion.
Against this backdrop, Coinbase’s revenue reached $2 billion, a quarter-on-quarter decrease of 10%; net income fell 94% quarter-on-quarter to $66 million, primarily impacted by a pre-tax loss of $597 million in its cryptocurrency asset portfolio, most of which were unrealized losses. Adjusted net profit was $527 million, and adjusted EBITDA was $930 million.
Trading Income
Coinbase’s financial report shows that trading is its main source of income, accounting for over 60% of its total revenue. Q1 trading revenue was $1.3 billion, down 19% quarter-over-quarter. Coinbase’s total spot trading volume decreased by 10% quarter-over-quarter to $393.1 billion, but outperformed the global spot market, which saw a 13% decline in trading volume. In terms of derivation, Coinbase’s trading volume reached $80.36 billion, with market share continuing to grow.
Among them, Q1 retail trading volume was $78.1 billion, down 17% from the previous quarter. Retail trading revenue of $1.1 billion decreased 19% sequentially and broadly in line with the decline in trading volume. In terms of institutional transactions, institutional trading volume of $315 billion decreased 9% sequentially, and institutional trading revenue of $99 million decreased 30% sequentially.
In addition to the impact of the macro background, the second factor for the sequential decline in revenue is the derivation business. The financial report states that Coinbase is investing in trading rebates and incentive measures to build liquidity and attract customers. These rebates and rewards have been deducted from institutional trading income.
Other Trading Income
Q1 other trading revenue was 68 million USD, unchanged quarter-on-quarter. The number of transactions on Base increased by 16% quarter-on-quarter, but the average revenue per transaction fell by 21%.
Subscription and service income
Q1 subscription and service revenue was $698 million, a quarter-over-quarter increase of 9%, primarily driven by the growth in stablecoin and Coinbase One revenue, with USDC’s market cap reaching a historic high of over $60 billion. However, blockchain rewards revenue decreased by 9% quarter-over-quarter, partially offsetting this growth. The main reason for the decline was the decrease in average asset prices quarter-over-quarter, particularly for ETH and SOL.
Q1 stablecoin revenue increased by 32% quarter-on-quarter to $298 million. Coinbase stated 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, reaching $12.3 billion.
Other subscription and service revenue was $141 million, a 5% quarter-over-quarter increase. The number of subscribers for Coinbase One reached a historical high in Q1, and the Coinbase One Premium service (monthly $300) also saw growth.
expenditure
Q1 total operating expenses were $1.3 billion, an increase of 7% quarter-over-quarter, which is $91 million. The main reasons were the increase in variable costs due to market activity at the beginning of the quarter and losses from crypto assets held for operations. Technical and development, general and administrative, as well as sales and marketing expenses increased by $40 million, a 4% quarter-over-quarter increase, primarily due to increased marketing spend (including performance marketing and USDC rewards) and higher customer support costs. At the end of the quarter, Coinbase’s full-time employees increased by 5% quarter-over-quarter, reaching 3,959.
The trading fees amounted to $303 million, accounting for 15% of net income, a 4% decrease quarter-on-quarter. The quarter-on-quarter decrease was primarily due to reduced customer trading activity and a decrease in blockchain reward fees related to the decline in average asset prices.
Technical and development expenses amounted to $355 million, a decrease of 4% compared to the previous period. The main reason for the decline is that, despite an increase in the total number of employees, personnel-related expenses have decreased. General and administrative expenses were $394 million, an increase of 9% compared to the previous period. The growth was mainly due to increases in customer support and personnel-related costs. Sales and marketing expenses were $247 million, an increase of 10% compared to the previous period.
Outlook
In April, Coinbase’s total trading revenue was approximately $240 million. Coinbase expects that subscription and service revenue for Q2 will be between $600 million and $680 million, as the expected quarter-over-quarter increase in stablecoin revenue will be offset by a decrease in blockchain rewards revenue due to falling asset prices; the proportion of trading fees to net revenue will be around 15%; and technology and development, as well as general and administrative expenses, will be between $700 million and $750 million.
It is worth mentioning that Coinbase is making a strong push into the derivation market, announcing the acquisition of Deribit, the world’s largest Bitcoin and Ethereum options trading platform, for $2.9 billion, which includes $700 million in cash and 11 million shares of Coinbase common stock, but the acquisition price is subject to adjustment according to customary practices. This transaction is still subject to regulatory approval and must meet other customary closing conditions, and is expected to be completed by the end of the year. Last year, Deribit had open contracts exceeding $30 billion, with a trading volume exceeding $1 trillion.
Coinbase Chief Financial Officer Alesia Haas stated in the earnings call: “We expect Derebit to immediately enhance our profitability and increase the diversity and sustainability of our trading revenues.” Additionally, Coinbase CEO Brian Armstrong mentioned in the investor call that this quarter, Coinbase will launch a pilot program allowing businesses to use stablecoins for payments and expenditures.
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