Written by: Xiao Bing, Deep Tide TechFlow

On May 8, after Coinbase's earnings report was released, COIN dropped about 6% in after-hours trading, crashing from around $193 to $182.

The numbers are ugly: revenue of $1.41 billion, down 31% year-over-year; a net loss of $394 million, compared to a profit of $65.6 million in the same period last year; adjusted EBITDA plummeted from $930 million to $303 million, shrinking by two-thirds; EPS recorded a loss of $1.49 per share, whereas LSEG analysts had previously expected a profit of $0.27, marking a complete double blow.

More glaring is that this is Coinbase's second consecutive loss-making quarter. The previous quarter also saw a loss of $667 million.

But if you only see these figures, you would, like most investors, miss the truly valuable information in this earnings report.

$482 million in “losses,” not real losses

Of the net loss of $394 million, $482 million came from unrealized losses on cryptocurrency investments held by the company, and another $35.2 million came from operational losses on cryptocurrency assets. Together, that's $517 million, all paper losses, without selling a single coin.

According to U.S. accounting standards, Coinbase must re-evaluate its cryptocurrency assets at market prices at the end of each quarter. In Q1, Bitcoin fell from $87,000 at the beginning of the year to around $66,000 by the end of the quarter, a drop of about 23%; Ethereum fared worse, dropping about 41%; the total market capitalization of the entire cryptocurrency market evaporated by approximately $600 billion. Coinbase's balance sheet merely passively mirrored this market situation.

In other words: Coinbase's coins did not move; they were simply "revalued" by the market. If Bitcoin rebounds in Q2, this over $500 million in "losses" will return as "profits."

Isolating this portion of paper losses, the true operational situation for Coinbase in Q1 is: adjusted EBITDA still stands at $303 million, marking the 13th consecutive quarter of positive EBITDA; by the end of the quarter, there was $10.2 billion in cash and cash equivalents on the books, plus $1.8 billion in cryptocurrency assets and tradable investments, giving an available resource of $12 billion.

This is a company that can still generate cash and is well-capitalized even in the crypto winter.

The real issue here: trading fee revenue halved

If the paper losses are noise, the collapse of trading fee revenue is the real red flag that needs to be watched in this earnings report.

Total trading revenue was $756 million, down 40% year-over-year. Retail trading revenue was $567 million, institutional trading revenue was $136 million, with the latter down 27% year-over-year, and the former saw an even steeper decline. In Q1, global cryptocurrency market spot trading volume fell by more than 20% quarter-over-quarter, with the entire industry’s activity shrinking by nearly half compared to its peak at the end of 2025. Low volatility has stifled trading, especially for long-tail assets that hardly anyone touches.

Cryptocurrency exchanges are cyclical businesses, a fact every veteran knows. But for Coinbase, the issue is not just the cycle; it is that its most profitable leg is structurally weakening. Retail users are dissipating, with net outflows from spot ETFs in Q1 between $500 million to $800 million; the money expected to enter because of ETFs in 2024 is voting with its feet.

Brian Armstrong did not shy away from this problem in the earnings report. He did not say, "the cycle will return," but rather, he spoke of something else: Coinbase needs to transform from a spot cryptocurrency platform into a comprehensive asset platform that supports derivatives, commodities, futures, and prediction markets.

This is not just PR jargon; it is an already occurring fact.

Truly valuable information: 12 products with annualized revenues over $100 million

The earnings report contains several pieces of data that mainstream financial media have not highlighted, but anyone with a little industry knowledge should pause when they see them:

The retail derivatives business has annualized revenue exceeding $200 million. Coinbase's market share in U.S. derivatives in Q1 increased fourfold year-over-year, making it the first platform to provide 7×24 hour U.S. perpetual futures trading. This was the first time since Deribit was acquired by Coinbase for $2.9 billion in August 2025 that it was fully reflected in the quarterly report. Before being acquired, Deribit had a trading volume of $12 trillion in 2024, with a record monthly volume of $18.5 billion in July 2025.

The prediction market reached an annualized revenue of $100 million in less than two months. This is the fastest product to reach this scale in Coinbase’s history, with initial liquidity supplied by Kalshi. Another phenomenal story outside of Polymarket is quietly growing.

The average holdings on the USDC platform reached a historic high of $19 billion, with stablecoin revenue increasing year-over-year by 11% to $305 million, the only core number in this earnings report that has shown year-over-year growth.

Subscription and service revenue was $584 million, accounting for 44% of net revenue. This means that nearly half of Coinbase's revenue is now unrelated to the survival of the current cryptocurrency market.

Armstrong provided a number in the earnings report: Coinbase now has 12 product lines with annualized revenues exceeding $100 million, with the prediction market about to become the 13th, which I believe is the most important sentence in this earnings report.

An exchange is transforming into a financial infrastructure company

If we line up Coinbase's actions over the past 18 months, the logic becomes clear:

In May 2025, it announced the acquisition of Deribit for $2.9 billion.

In August 2025, it officially completed the acquisition, instantly becoming a top player in global cryptocurrency derivatives (measured by open interest and options volume).

During 2025, it joined the S&P 500.

In early 2026, it launched U.S. stock and ETF trading within the main Coinbase app, integrating traditional assets and digital assets into the same portfolio.

On April 2, 2026, it received conditional approval for a national bank trust license from the U.S. Office of the Comptroller of the Currency (OCC).

In Q1 2026, it launched the prediction market, using Kalshi for liquidity.

The company is redefining itself from being a "crypto spot exchange" to a "unified entry point for all tradable assets on and off-chain." Armstrong calls this "Everything Exchange."

Why must it do this? Because the nature of the spot trading business is cyclical, based on transaction fees and homogeneous competition; Binance is cheaper in international markets, DEX is freer on-chain, and decentralized perpetual contracts are capturing institutional shares. If Coinbase only defends this small patch of turf, it will be gradually eroded.

But if it stacks derivatives, stablecoins, subscriptions, custody, Base chain economy, banking licenses, prediction markets, U.S. stocks, and agentic business all together, it will no longer be an exchange, but a comprehensive financial infrastructure platform native to cryptocurrency.

The valuation logic for such a business is entirely different from that of a spot exchange.

Did the market get it wrong?

Back to COIN’s 6% drop in after-hours trading.

Short-term traders see: a net loss of $394 million, revenue halved year-over-year, EPS significantly missed, and the derivatives industry’s Robinhood and Kraken are also competing for the cake. The logic closes, and they sell off and leave.

But in the medium to long term, the real message conveyed by this earnings report is:

First, Coinbase's spot trading business is being "diluted" by its own derivatives and subscription businesses. Viewed another way, this means the beta of Coinbase’s earnings report to cryptocurrency prices is declining, which is a necessary transition from "crypto proxy stocks" to "fintech stocks."

Second, the $482 million in unrealized losses will rebound with the price of the coins; this is not a risk, but a hidden bullish option. If you believe in the next cycle of cryptocurrency, this part is precisely free alpha.

Third, the prediction market achieving an annualized $100 million in two months, derivatives market share increasing fourfold year-over-year, and 12 product lines exceeding $100 million—these numbers collectively paint the picture of a company that is not struggling for survival but is using the trough period in spot trading to accelerate the construction of its product matrix.

Cryptocurrency is a cyclical business, but great companies are counter-cyclical, building products in bear markets and harvesting in bull markets. This quarter’s earnings report from Coinbase is fundamentally the first act of this script.