A Brief Discussion on #Coinbase's Financial Report
As expected, Coinbase's financial report for the fourth quarter of 2024 was outstanding, exceeding market expectations by about double. The total revenue for the fourth quarter was $2.271 billion, a quarter-on-quarter increase of 88%. This data is quite alarming and illustrates the difference between the pre-election and post-election market conditions, further proving the election's positive impact on the cryptocurrency sector, especially with pro-cryptocurrency officials from the presidency to the vice presidency, as well as the SEC and CFTC.
- Coinbase's Earnings Comparison
In the fourth quarter, Coinbase's trading revenue alone was $1.556 billion, a quarter-on-quarter increase of 172%. The third quarter was quite poor, while the fourth quarter was very impressive, with retail trading volume at $1.347 billion, accounting for 86.57% of total trading revenue, indicating a strong FOMO enthusiasm among retail investors in the fourth quarter. Of course, many may be more curious about whether this enthusiasm can be maintained in the first quarter of 2025.
1.1 Coinbase's First Quarter 2025 Earnings Preview
A sneak peek reveals that as of February 12, 2025, at midnight Beijing time, Coinbase's first quarter earnings are $750 million, which is roughly half the time and about half the earnings. If user sentiment does not continue to improve, it will be difficult for the first quarter of 2025 to exceed the quarter-on-quarter figures. However, even now, during this "garbage time," investor enthusiasm remains decent.
Many may wonder, if #Bitcoin is clearly declining, where is all this trading volume coming from?
1.2 Coinbase's 2024 Revenue Distribution
There is an interesting statistic: according to fourth quarter data, #BTC accounted for 27% of total trading volume and trading revenue, ranking first, which was expected. However, the second highest trading revenue came from $XRP, accounting for 14% of total revenue, but this was only in the fourth quarter; in the other three quarters and for the year, it was not on the list.
Conversely, the much-maligned #ETH achieved 10% of both trading volume and trading revenue in the fourth quarter, ranking second overall, while another highly regarded token, #SOL, was categorized under "others," and its trading revenue did not show up because it was below 10% of the total.
Looking at the total data for 2024, Bitcoin's trading volume was 32% of the total, with revenue accounting for 30%, ranking first. Ethereum's trading volume was 12%, with revenue at 13%, ranking second. USDT's trading volume was slightly higher than ETH at 13%, but its trading revenue was categorized under "others."
From this data, although many may be reluctant to believe it, American investors still have a strong preference for investing in $ETH. However, throughout 2024, investor trading in ETH has been declining, from 13% in the first quarter to 15% in the second and third quarters, down to 10% in the fourth quarter. Trading contributions also fell from 15%, 17%, and 16% to 10%. So while ETH's trading volume and fees still rank second in Coinbase, the proportion has been declining, and there has yet to be a clear replacement for ETH.
1.3 Is There a Comparability Between Retail and Institutional Trading?
Earlier in the financial report, it was mentioned that retail trading volume in the fourth quarter of 2024 contributed 86.57% of total trading volume, amounting to $1.347 billion, while professional institutions only provided $141 million in revenue. Interestingly, in the fourth quarter, retail trading volume was $94 billion, while institutional trading volume was $345 billion. So while institutions provided a large amount of trading, Coinbase's main revenue still came from retail, likely due to differences in transaction fees.
- Subscription Services
This is a very interesting idea. Coinbase launched the Coinbase One service, which is worth mentioning because it is quite good; I even purchased it myself. Although it has several features, the main ones are three: one is increasing the yield on USDC (without staking) to 4.5% (the first $30,000 is at 4.5%, and amounts above that return to normal), while without a subscription, it is 4% (I can't remember if it's 3.5% or 4%). The other is that monthly trading volume (spot) within $10,000 (for new coins) is exempt from transaction fees (not applicable to professional trading).
These two features are particularly suitable for ordinary novice users, who typically have low trading volumes and do not require complex trading functions, while also increasing their yields. The cost is nearly $300 (for new coins) per year, with a discount for the first year. I believe many exchanges could use this approach to provide additional support to users. The most important feature should be the third one.
If the first two features are suitable for newcomers, the third feature provides a monthly gas subsidy worth 10 USDC on BASE. While 10 USDC may not seem like much, it adds up to $120 a year, which is already 40% of the subscription fee. Additionally, there are extra yields and dedicated customer service, making it quite cost-effective.
Thus, Coinbase One's subscription service generated $2.3 billion in revenue in 2024, about double that of 2023.
- Stablecoin and Blockchain Revenue
As everyone knows, Coinbase is a partner in USDC, and issuing USDC generates substantial income. In the fourth quarter, stablecoin revenue decreased by 9% quarter-on-quarter to $226 million, but annual revenue grew by 31% year-on-year to $910 million. The decline was mainly attributed to lower effective interest rates and the impact of new participants entering the USDC ecosystem, which offset some revenue.
In the fourth quarter, blockchain rewards revenue was $215 million, a quarter-on-quarter increase of 39%. One of the main reasons for this was the overall rise in cryptocurrency prices and increased staking yields, such as for #SOL.
Therefore, for exchanges with significant asset volumes, the rewards from blockchain (staking, etc.) still provide considerable income.
- Conclusion
Although what I mentioned is only part of the story, and expenses have not been discussed, these details are not particularly meaningful. Overall, Coinbase's total revenue in 2024 was impressive, with a net income of $3.348 billion, approximately 3.5 times that of 2023, and a net income of $1.289 billion in the fourth quarter, higher than the combined total of the second and third quarters.
So the financial report is indeed good. However, many may ask why the stock price fell after such a good report. Even now, despite #Bitcoin rising to $98,000, $Coin is still down nearly 7%. This is likely a case of "Sell The News." Yesterday, due to the strong expectations for the financial report, the stock opened high and continued to rise, but even with the current decline, it is still higher than the closing price on Wednesday.
Therefore, this issue should be noted for some U.S. stocks. In fact, Coin has experienced this situation more than once; many times, the financial report expectations were good, but the stock price fell at the opening, often because it had already risen significantly the day before the report was released, leading to a large number of investors selling off after the report.
Another important reason this time is that Bitcoin's price is not very good, and many traditional investors are not optimistic about the future trends of cryptocurrencies.
PS: As of the end of 2024, Coinbase has 3,772 full-time employees.
This post is sponsored by @ApeXProtocolCN | Dex With ApeX
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