Key points from Coinbase shareholder letter: Q2 institutional trading volume increased by 50%, Ethereum trading volume surpassed Bitcoin for the first time
Institutions are rushing in.Written by: Qin Xiaofeng, Odaily Planet Daily
Edited by: Hao Fangzhou
In the early hours of today Beijing time, the largest cryptocurrency platform in the U.S., Coinbase (NASDAQ: COIN), released its Q2 shareholder letter (click to view).
The data shows that Coinbase's total revenue for Q2 was approximately $2.23 billion, exceeding market expectations of $1.747 billion, and up 80.9% compared to the previous quarter ($1.802 billion);
Net income was $2.033 billion, with other income totaling $194 million; Q2 net profit was $1.61 billion, better than the market expectation of $566 million, and up 108% compared to Q1 ($771 million); adjusted EBITDA was $1.15 billion, exceeding market expectations of $961.5 million; monthly active users in Q2 reached 8.8 million, a 44% increase quarter-over-quarter, with total users reaching 68 million.
After the data was released, Coinbase's stock (COIN) rose by more than 3.5% in after-hours trading. Over the past week, the COIN price has continued to rise, climbing from $230 to $282, an increase of over 20%;
As of the time of publication, COIN was trading at $270, 8% higher than the IPO price ($250), but down 41% compared to the opening price on the first day ($381).
Below, Odaily Planet Daily excerpts and interprets the key information from Coinbase's shareholder letter:
1. Institutional entry accelerates, with more attention on Ethereum
The chart below shows that Coinbase's total trading volume in Q2 was $462 billion, a 37% increase compared to Q1's $335 billion.
(Trading volume structure chart)
Among this, retail user (individual) trading volume was $145 billion, accounting for only 31%; institutional user trading volume contributed the vast majority, reaching $317 billion.
In terms of growth, retail trading volume increased by only 20.8% compared to the previous quarter, while institutional user trading volume surged by 47%, which is undoubtedly exciting news for the market.
It should be noted that in Q2, several U.S. publicly listed companies, including MicroStrategy, increased their Bitcoin holdings. At the same time, Coinbase established partnerships with industry leaders including Musk, PNC Bank, SpaceX, Tesla, Third Point, and WisdomTree. These may have positively influenced the increase in Coinbase's institutional trading volume.
However, from the specific income structure, retail trading still contributes more. Data shows that Q2 trading revenue from retail was $1.828 billion, while revenue from institutions was $102 million.
The fundamental reason is that Coinbase offers preferential fee rates for institutional users, with transaction fees far lower than those for retail users.
(Revenue structure chart)
Total trading revenue in Q2 was $1.93 billion, a 25.3% increase compared to Q1 ($1.54 billion), and a 1035% increase compared to the same period last year ($170 million).
From the trading structure by cryptocurrency, Ethereum dominated. Data shows that Ethereum accounted for 26% of Coinbase's trading volume in Q2, while Bitcoin accounted for 24%, marking the first time Ethereum's trading volume share surpassed that of Bitcoin.
Coinbase provided three explanations for this phenomenon:
After May, the market cooled, and Bitcoin trading volume slightly decreased in Q2;
Due to the growth of the DeFi and NFT ecosystems, as well as increased demand driven by our ETH2.0 Staking product, Ethereum trading volume saw significant growth;
Coinbase added other assets to the platform, and trading volume increased significantly.
Although Bitcoin's trading volume share has declined, it remains the mainstay of Coinbase's asset reserves. Data shows that as of June 30, the total assets on the platform were $180 billion, with the platform's crypto assets accounting for 11.2% of the total market value of cryptocurrencies—of which 47% is BTC and 24% is ETH.
Despite the decline in platform assets, Coinbase's monthly trading users (MTU) still maintained growth, increasing from 6.1 million in Q1 to 8.8 million in Q2.
"The growth of MTU in Q2 was driven by the cryptocurrency market environment, product launches, our marketing efforts, and the increase in the number of cryptocurrency assets we support."
2. Revenue diversification
For most cryptocurrency trading platforms, trading revenue is a significant source of income. However, a single revenue model also weakens their risk resistance, especially in a bear market where market activity declines, trading revenue will directly shrink significantly. Coinbase is also aware of this and is continuously expanding its revenue channels and sources.
(Subscription and service revenue)
Data shows that in Q1, total "subscription and service revenue" was $56.4 million, while in Q2, it totaled $102.6 million, an 82% increase quarter-over-quarter; moreover, non-trading revenue's share of total revenue rose from 3.6% in the previous quarter to 5.1%. Although the share is still small, the trend is positive.
Coinbase remains a trading-led company, but in terms of revenue items, non-trading projects are becoming increasingly important, and these measures will help Coinbase expand its current revenue base. (Odaily Planet Daily note: Subscription and service revenue includes custody fees, blockchain revenue, interest rewards, etc.)
Another detail to note is that Coinbase's net profit in Q2 was $1.61 billion, up 108% compared to Q1 ($771 million), but its revenue growth did not double.
Coinbase explained that the fundamental reason for the profit growth was due to tax relief. "In Q2, we recognized $737 million in tax benefits, primarily due to the tax deductions for stock-based compensation provided to full-time employees after our direct listing in April."
3. How will Coinbase perform in Q3?
Throughout July, the cryptocurrency market did not show significant improvement, with Bitcoin fluctuating around the $35,000 mark. However, since the Ethereum London upgrade on the evening of August 5, the market seems to have started to recover, with Bitcoin continuously rising, reaching a high of $46,000.
So, how does Coinbase predict its performance for Q3? The official introduction states:
"In July, retail MTU and total trading volume were 6.3 million and $57 billion, respectively, due to a significant decline in cryptocurrency asset prices and volatility compared to Q2 levels.
Since August, retail MTU and trading volume have slightly improved compared to July levels, but still remain below the levels at the beginning of this year. Therefore, we believe that retail MTU and total trading volume in Q3 will be lower than in Q2."
Due to a relatively pessimistic expectation for the short-term market, COIN's stock price did not rise significantly after the data was disclosed, and even fell by more than 3% in after-hours trading.
Regarding the long-term development of the cryptocurrency market, Coinbase remains optimistic. "A recent survey by the University of Chicago shows that 13% of Americans traded cryptocurrency assets last year, while the proportion of stock trading was 24%.
These adoption trends, along with the recent government's focus on cryptocurrency as a tax revenue source, indicate that we have reached a turning point—cryptocurrency has arrived."
