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Coinbase’s Open Books Makes Crypto Hard to Ignore

Coinbase, the largest US-based cryptocurrency trading venue, has opened up the books highlighting just how powerful this crypto behemoth has become.

There are more Coinbase users now than there ever will be Bitcoin mined. Over 10% of the entire crypto market rests in its balance sheet. And it is raking in billions, with revenue more than doubling from the last quarter.  

Ahead of its announced April 14th public direct listing on the US stock exchange, Coinbase has released preliminary first quarter estimated results. Coinbase is set to become the first crypto exchange to trade on the US stock market.

Massive Growth

Coinbase has 56M verified users, up 30% from 43M verified users at the end of Q4; $223B in total crypto assets, up 148% from $90B from Q4 and representing over 11% of the entire crypto market share; and $1.8B in total revenue, up over 200% from $585M last quarter. 

In fact, Coinbase’s $1.8B revenue from Q1 2020 far surpasses their entire 2020 annual revenue of $1.3B.

Other relevant Q1 metrics include $335B in trading volume and net income somewhere between $730 to $800M.

Coinbase’s user numbers and profits have trended upwards in the recent crypto bull run, but a good deal of this growth may also be attributed to growing mainstream interest in crypto, both from institutional investors and retail.

The Rest of 2021

Looking towards the rest of 2021, Coinbase notes that one of its largest revenue streams, transaction revenue, is “highly correlated” to its monthly transacting user (MTU) metric. Coinbase reports it had 6.1M MTUs in the first quarter, more than double 2.8M MTU in Q4 2020. 

Since active users are closely tied to the state of the larger crypto market, Coinbase forecasts three potential scenarios for the rest of 2021.

If the overall crypto market cap increases, Coinbase predicts that their average 2021 MTUs could increase to 7M. If the market stays flat, MTUs could decline from 2021 highs to 5.5M. And if the market crashes with low volatility thereafter, MTUs might decrease to similar levels as Q4 2020.

DeFi Comparison

Variant investor Spencer Noon compared Coinbase’s Q1 2021 estimated earnings to Uniswap based on “figures queried in real-time on-chain.”

The results suggest impressive growth for DeFi in parallel, and perhaps to an even greater extent than with a centralized exchange like Coinbase.

For instance, while Uniswap only has 1.25M users compared to Coinbase’s 56M, Uniswap has still done $92B in trading volume compared to Coinbase’s $335B. This means that Uniswap has roughly 27% of the trading volume as Coinbase with only 2% of the user base. 

Similarly, Noon estimated Uniswap’s net Q1 income to be $276M, or 34% of Coinbase’s $800M with a mere fraction of the users. 

On one hand, these numbers suggest that the average Uniswap user is moving significantly more volume than the average Coinbase user. On the other, the comparison suggests that DeFi spaces still have massive room for growth once general interest expands and retail investors begin trickling in.

To be sure, some community members, including FTX CEO Sam Bankman-Fried, questioned the potential metrics used to measure Uniswap’s net income.

The Larger Crypto Space

There’s still a lot of “cognitive dissonance and prejudice towards crypto companies” as indicated by outrage over Coinbase’s rumored $100B valuation, compared to very little fuss over Robinhood’s rumored $50B valuation after a ballpark $1.3B in 2020 revenue despite Coinbase having double the users, as Marqueta strategist Ellie Frost pointed out on Twitter

Still, while some traditional investors continue to decry crypto as a scam, it will likely be hard for the larger mainstream market to ignore Coinbase’s massive $1.8B in Q1 revenue. 

There’s a good chance that more mainstream interest in Coinbase will lead to more mainstream interest in crypto, too. At least, it will make it harder to ignore.