Detailed explanation of Coinbase Q1 financial report: Net profit plummeted by 94% under the influence of floating losses in the portfolio, and the acquisition of Deribit focuses on derivatives

Comprehensive editor: Felix, PANews

US cryptocurrency exchange Coinbase released its first quarter (Q1) financial report on May 8 local time. As market trading cooled down from the rise after the US election in the previous quarter, revenue and net profit did not meet expectations.

As of March 31, adjusted net profit was US$527 million. Earnings per share was $0.24, lower than the market's general expectations of $1.93. Total revenue was US$2 billion, slightly lower than expected US$2.12 billion and lower than US$2.3 billion in the fourth quarter of 2024. Q1 trading revenue fell 19% to $1.2 billion, and trading volume fell 10%.

Perhaps affected by this news, Coinbase (COIN) shares fell 2.67% in after-hours trading, while up 5% the previous trading day. COIN has fallen 16.83% since the beginning of the year.

income

The average volatility of cryptocurrency assets rose in Q1, with BTC hitting an all-time high in January. However, cryptocurrency prices fell simultaneously with the overall market decline due to tariff policies and macroeconomic uncertainty. Compared with the end of the fourth quarter, the total market value of cryptocurrencies fell 19% to $2.7 trillion at the end of the first quarter.

Against this background, Coinbase's revenue reached US$2 billion, a month-on-month decrease of 10%; net income plummeted 94% month-on-month to US$66 million, mainly affected by the pre-tax losses of the crypto asset portfolio, most of which were unrealized losses. Adjusted net profit was US$527 million and adjusted EBITDA of US$930 million.

Transaction income

Coinbase's financial report shows that transactions are its main source of revenue, accounting for more than 60% of its total revenue. Q1 transaction revenue was US$1.3 billion, down 19% month-on-month. Coinbase's total spot trading volume fell 10% month-on-month to $393.1 billion, but it was better than the global spot market, which saw a 13% month-on-month decline. In terms of derivatives, Coinbase's trading volume reached US$803.6 billion, and its market share continued to grow.

Among them, the retail trading volume in Q1 was US$78.1 billion, a month-on-month decrease of 17%. Retail trading revenue was US$1.1 billion, a month-on-month decrease of 19%, which is basically consistent with the decline in trading volume. In terms of institutional transactions, institutional transaction volume was US$315 billion, a decrease of 9% month-on-month, and institutional transaction revenue was US$99 million, a decrease of 30% month-on-month.

In addition to the macro background impact, the second factor in the month-on-month decline in revenue is the derivatives business. The financial report said Coinbase is investing in trading rebates and incentives to build liquidity and attract customers. These rebates and rewards have been deducted from institutional transaction income.

Other transaction income

The revenue of other transactions in Q1 was US$68 million, which was unchanged from the previous month. Base's transaction volume increased by 16% month-on-month, but average revenue per transaction fell by 21%.

Subscription and service revenue

Q1 subscription and service revenue was US$698 million, a 9% increase from the previous quarter, mainly due to the growth in stablecoins and Coinbase One revenue, with USDC's market capitalization hitting an all-time high of more than US$60 billion. But blockchain reward revenue fell 9% month-on-month, partially offsetting the increase. The main reason for the decline is the decline in average asset prices month-on-month, especially ETH and SOL.

In Q1, stablecoin revenue increased by 32% month-on-month to US$298 million. Coinbase said the increase was partially offset by lower average interest rates. The average holdings of USDC in Coinbase products increased by 49% month-on-month to $12.3 billion.

Other subscription and service revenue was US$141 million, up 5% month-on-month. Coinbase One’s subscriber count hit a record high in Q1, with Coinbase One Premium service ($300 per month) also seeing growth.

expenditure

Total operating expenses in Q1 were USD 1.3 billion, up 7% from the previous quarter, or USD 91 million, mainly due to increased volatile expenses caused by market activity at the beginning of the quarter and the loss of crypto assets held for operations. Technology and development, general and administrative management, and sales and marketing expenses increased by $40 million, a 4% increase from the previous quarter, mainly due to increased marketing spending (including performance marketing and USDC incentives) and increased customer support costs. At the end of the quarter, Coinbase's full-time employees increased by 5% month-on-month to 3,959.

Transaction fees were US$303 million, accounting for 15% of net income, down 4% month-on-month. The month-on-month decline is mainly due to reduced customer transaction activity and reduced blockchain reward fees associated with a decline in average asset prices.

Technology and development expenses were US$355 million, down 4% month-on-month. The main reason for the decline is that despite the increase in total staff, the staff-related expenses have decreased. General and administrative expenses were US$394 million, up 9% month-on-month. The growth is mainly due to the increase in customer support and staff-related costs. Sales and marketing expenses were US$247 million, up 10% month-on-month.

Outlook

In April, Coinbase's total transaction revenue was approximately $240 million. Coinbase expects Q2 subscription and service revenue to be between $600 million and $680 million, as the quarter-on-month increase in stablecoin revenue is expected to be offset by a decline in blockchain reward revenue caused by a decline in asset prices; transaction fees as a percentage of net revenue will be around 15%; and technology and development and general and administrative expenses will be between $700 million and $750 million.

It is worth mentioning that Coinbase is focusing on the derivatives market, and it announced the acquisition of the world's largest Bitcoin and Ether options exchange Deribit for US$2.9 billion, including US$700 million in cash and 11 million shares of Coinbase common stock, but the acquisition price adjustment is required according to customary practice. This transaction still needs to be approved by regulatory authorities and meet other customary closing conditions and is expected to be completed by the end of the year. Last year, Deribit's open contracts exceeded $30 billion and trading volume exceeded $1 trillion.

“Derebit is expected to immediately increase our profitability and increase the diversity and durability of transaction revenue,” Coinbase Chief Financial Officer Alesia Haas said on the earnings call.

In addition, Coinbase CEO Brian Armstrong said on an investor call that this quarter, Coinbase will launch a pilot program that allows businesses to use stablecoins to pay and spend.

Related Readings: $2.9 billion record merger: Coinbase swallows Deribit, the king of options, and the crypto derivatives market ushers in huge changes