Coinbase Strategy Interpretation: DEX will surpass CEX Products and International Expansion

Author: Kunal G, crypto analyst; translation: Golden Finance xiaozou

The Coinbase investor relations team invited me to discuss the company's first-quarter results with several analysts who are deeply involved in the crypto field. The addition of CEO Brian Armstrong and CFO Alesia Haas put the topic far beyond quarterly performance, delving into Coinbase’s long-term strategy.

Here are my core views that I have refined for crypto investors. These interpretations represent my personal views only and are not official statements of Coinbase. Some of the information is cited from Coinbase's public disclosure documents.

1. DEX will eventually surpass CEX

Coinbase firmly believes that the future belongs to the on-chain world. When I mentioned the increasingly fierce competition in decentralized exchanges (DEXs), Brian said bluntly that he ultimately expects DEX to exceed CEXs. This view coincides with me, but I was so frank.

Coinbase’s response strategy is to allow users to trade assets directly through the Coinbase wallet/front end, so that they can still capture the flow of value orders when they settle on the chain. This can be understood as Coinbase's practice of "DeFi-CeFi hybrid mode".

In addition, Coinbase has made substantial investments in DEX through Coinbase Ventures. These investments deliberately avoid acquisitions to ensure that the underlying infrastructure remains decentralized.

It is worth mentioning that Coinbase's venture capital holdings are priced at cost, which has not been fully recognized by the market. If the crypto space continues to grow, these investments may bring asymmetric returns—which traditional finance (TradFi) analysts often fail to understand.

2. Competition will expand the industry cake

Some analysts questioned: As the regulation gradually becomes clear, will the entry of traditional financial giants such as Robinhood or Stripe threaten Coinbase's market dominance? Coinbase is negative, believing that traditional financial players are actually expanding the overall market size, which will benefit products such as USDC, Base and Coinbase hosting. For example, Stripe chose USDC as the settlement currency for its new crypto payment channel. The increase in USDC circulation means that Coinbase revenue will grow, and Stripe has become a demand driver rather than a competitor.

In the field of direct competition, Coinbase believes that its focus on encryption and a more comprehensive portfolio constitute a lasting advantage. Most traditional financial companies only test the waters with small teams and shrink the front line in the bear market.

However, these traditional financial companies are usually more capable than the competitors Coinbase faces in the past, so the competition they bring will be extremely fierce.

3. Product and international expansion

Coinbase has $10 billion in cash lying on its balance sheet and is currently investing heavily in expanding its product matrix. Coinbase announced the acquisition of Deribit, the leading cryptocurrency options exchange, which will not only enrich the product line, but CFO Alesia Haas also expects the transaction to increase adjusted profit before interest, tax, depreciation and amortization (EBITDA).

Several small acquisitions were also completed this quarter, among which the on-chain advertising platform Spindl is particularly worthy of attention. Although the team has not made significant moves yet, it may help Coinbase to achieve wallet and front-end monetization more efficiently in the future.

Coinbase is working to launch perpetual contract products to U.S. customers. The product is open to international users, but has not yet been approved by U.S. regulators.

At the same time, Coinbase is also vigorously expanding its international market. The company recently obtained a full operating license in Argentina, but also completed registration with the Indian Financial Intelligence Department. I personally have a lot of expectations that they will enter the Indian market soon.