After the earnings report was released, Coinbase's stock price fell by about 4.7% in after-hours trading, with a cumulative decline of over 15% since December this year.

written by: Bao Yilong

Source: Wall Street Insights

The cryptocurrency exchange Coinbase experienced significant pressure in the first quarter, with both revenue and profits falling below expectations.

On May 7, after the US stock market closed, Coinbase reported a year-on-year revenue decline of 31% to $1.41 billion in the first quarter, exceeding the market's expected drop, continuing the downward trend after a 20% decrease in the previous quarter.

After accounting for unrealized losses from crypto holdings and investments, the company's net loss reached $394 million, equating to a loss of $1.47 per share, compared to a net profit of $66 million in the same period last year.

The core trading business was the biggest drag this quarter. Coinbase's spot trading volume in the first quarter was $202 billion, a 50% year-on-year decrease. However, the financial report was not entirely weak. Stablecoins and derivatives became a few bright spots:

Revenue from USDC-related stablecoins grew by 11% year-on-year to $305 million.

Institutional trading revenue instead increased by 37% year-on-year to $136 million, mainly benefiting from derivative revenue contributions from the acquisition of Deribit.

The company stated that after launching the "Everything Exchange" at the end of last year, there was strong growth in derivatives, prediction markets, and decentralized trading in the first quarter. After the financial report was released, Coinbase's stock price fell by about 4.7% in after-hours trading, with a cumulative decline of over 15% since December this year.

Spot Trading Cooling: Volume, Users, and Asset Prices Under Pressure

Coinbase's core trading business is clearly dragged down by the cooling of the crypto market. The platform's trading volume in the first quarter was $202 billion, almost halving from $401 billion in the same period last year.

The company explained that the global cryptocurrency spot market trading volume fell by 44% year-on-year, combined with a weakening market environment, directly lowered platform trading activity. By customer:

• Consumer trading volume: $36 billion, down 54% year-on-year;
• Institutional trading volume: $166 billion, down 48% year-on-year.

Since consumer trading fees are significantly higher than those for institutional clients, the decline in consumer trading volume has a bigger impact on revenue. Consumer trading revenue dropped from $1.096 billion in the same period last year to $567 million, a 48% year-on-year decline, making it the main source of the drop in trading revenue.

Looking at the asset structure of trades, Bitcoin has returned to being the main focus of trading.

In the first quarter, Bitcoin accounted for 40% of trading volume, up from 27% in the same period last year; Ethereum's share rose to 19%, up from 11% last year; XRP's share fell to 9%, while USDT's share dropped significantly from 13% to 2%. This indicates that trading activity is becoming more concentrated in mainstream assets, with trading volume in long-tail assets and some stablecoins decreasing.

In terms of platform asset size, as of the end of March, Coinbase's platform assets stood at $294.4 billion, down from $327.5 billion at the same time last year.

The company stated that the main reason was the decline in prices of most crypto assets, leading to an approximate loss of $67.4 billion in asset value, but the unit increase in assets such as Bitcoin offset some of the impact.

Trading Revenue Down 40%, Institutional Business Grows Against the Trend Thanks to Deribit

In the first quarter, Coinbase's trading revenue was $756 million, a 40% year-on-year decline, but the internal structure showed a clear divergence.

Consumer trading revenue was $567 million, down 48% year-on-year, mainly dragged down by the decline in spot trading volume. Institutional trading revenue, however, increased from $98.89 million in the same period last year to $136 million, a year-on-year increase of 37%.

The counter-cyclical growth of the institutional business did not come from spot trading but from derivatives. Coinbase disclosed that derivative trading contributed about $68.5 million in incremental revenue, mainly due to the acquisition of Deribit completed in August 2025.

Deribit is a cryptocurrency derivatives exchange that Coinbase acquired for approximately $4.3 billion total consideration, including $721 million in cash and $3.573 billion in stock.

The Deribit acquisition resulted in approximately $2.819 billion in goodwill and $1.39 billion in identifiable intangible assets. With the consolidation, Coinbase's institutional derivative capabilities have strengthened, but it also brought higher amortization and integration costs.

The expansion of derivative business is also reflected in the scale of collateral. By the end of the first quarter, the fair value of crypto assets pledged by customer derivatives was $333 million, a significant increase from $27.4 million at the end of last year, indicating that derivative trading activity has indeed taken off.

Stablecoins Are One of the Few Bright Spots, But Falling Rates Are Beginning to Weaken Revenue Flexibility

Subscription and service revenue for the first quarter was $584 million, a year-on-year decline of 14%. Among them, revenue from stablecoins performed the best, at $305 million, a year-on-year increase of 11%. The growth in stablecoin revenue mainly came from two factors:

• The average balance of USDC held by customers within Coinbase products rose, contributing about $64.2 million in incremental revenue;
• The average balance of USDC held outside the platform increased, contributing about $23.2 million in incremental revenue.

However, this growth was significantly offset by falling interest rates. The company stated that the average interest rate fell by 67 basis points, causing a negative impact of $57.5 million on stablecoin revenue.

Additionally, the company adjusted the classification of some stablecoin revenue this quarter: income generated from stablecoin balances used for corporate payments was re-classified from "stablecoin revenue" to "corporate interest and other income," without affecting total revenue. The related reclassification amount in the same period last year was $23.5 million.

There is also a concentration issue worth noting in the stablecoin business. The financial report showed that one trading counterpart contributed 23% of Coinbase's total revenue for the first quarter, compared to 15% in the same period last year.

The company did not name the counterpart, but given the stablecoin revenue model, the market usually pays attention to its revenue dependency on Circle and the USDC ecosystem.

Layoffs and AI Transformation Progressing in Parallel

In the face of market downturn pressure, Coinbase has begun to cut costs and adjust its strategic focus.

CEO Brian Armstrong announced on Tuesday that the company will cut about 700 employees and focus the skills training of remaining employees on artificial intelligence, while streamlining management levels. The company expects this reorganization to incur up to $60 million in costs.

Owen Lau also warned that if the crypto market deteriorates further, Coinbase does not rule out the possibility of additional layoffs. Haas responded to this by saying: We cannot predict the future, but as a publicly traded company, we will always do what is most beneficial for the company.

The change in the competitive landscape is also noteworthy. Morgan Stanley recently announced the launch of cryptocurrency trading services on its E*Trade platform, with more competitive pricing, and the entry of traditional financial institutions is expected to suppress Coinbase's trading fee income.

In response, CFO Alesia Haas stated: We have always anticipated that trading fees would become commoditized. We have also conducted rate experiments, and so far, customers do not appear to be price-sensitive.