Coinbase Setting A 'Great Precedent' for Crypto with its Impressive Revenue & User Boom

Coinbase is all set to make its trading debut on Nasdaq under the ticker “COIN” next week. But before that, the biggest cryptocurrency exchange in the US released its Q1 2021 earnings that is going to blow people’s minds, especially traditional finance, which can no longer ignore the sector with such big numbers. As expected, the figures were impressive, although not surprising given the bull rally the cryptocurrency market is enjoying. Q1 was actually Bitcoin’s best one since 2013, and altcoins recorded gains as high as 2,000%. So, it makes sense Coinbase had a monster Q1, having more revenue in mere three months than it did in the entire 2020. Coinbase reported revenue of $1.8 billion, with an adjusted EBITDA of $1.1 billion. The exchange had a net income of about $800 million, a growth of nearly 313% over the last quarter. Increased revenue means the top executives made a massive earning with the co-founder and CEO Brian Armstrong making $59.5 million in total compensation last year, which is more than the top executives of JPMorgan and Goldman Sachs. These figures were the result of the trading volume on the spot exchange reaching $335 billion, an increase of 272% from last quarter, with 6.1 million monthly transacting users, an increase of 3.3 million. Assets on the platform were $223 billion, representing 11.3% of the crypto asset market. Out of this, a whopping $122 billion is coming directly from institutions. While Coinbase cautioned unpredictability, it expects “meaningful growth” the entire year on the back of increased institutional interest. Sam Bankman-Fried, CEO of competing exchange FTX said,

“This is an impressive financial statement, and a huge step for the industry. And kudos to Coinbase for waiting to go public until they were consistently profitable and at least somewhat projectable. That's better than many listings. And it's a great precedent for crypto.”

Users Growth

This boom was also seen in its users as Coinbase added more than 13 million new users in a matter of two months. At the end of Q1, the exchange had 56 million customers, the rate of new user acquisition around 2x the rate seen in November 2017. Trader and economist Alex Kruger contemplated,

“Coinbase has 56 million verified users. Assume 70% are American and 90% are under 50. That would represent 17% of the US population under 50.”

Interestingly, Coinbase’s user base is bigger than Cash App and Venmo and significantly larger than Robinhood and eToro. “Incumbents can no longer ignore this,” noted John Street Capital. “The fact that COIN may do more revenue / EBITDA than ICE, CME, NDAQ, & CBOE this year helps give credence to their argument that they can be the "exchange" destination even as the asset class is institutionalized.” Ellie Frost, a former tech investment banker, also argued that there is “cognitive dissonance and prejudice towards crypto companies.” She compared “widespread media outrage and disbelief” of crypto native Coinbase having a $100 billion to that of Robinhood, which recently filed its IPO and is expected to have a ballpark $1.3 billion revenue for 2020, having a rumored valuation of about $50 billion. However, Coinbase has four times more users than Robinhood and reported $1.28 billion in revenue in 2020. According to her, the reason behind Coinbase postponing its public listing was so that they can release its explosive Q1 results and “set the playing field for the growth coming in 2021.” These numbers are surely going to drop a lot of jaws, surpassing the expectations, which given that the bull market is further expected to continue, this will persist in the following quarters as expected by Coinbase as well. Already, it is fueling a frenzy among Korean investors who are piling into the nation's crypto stocks. Hanwha Investment & Securities Co., which owns a 6.15% stake in Dunamu that operates leading South Korean exchange Upbit, is the best performer among Kospi stocks by gaining over 210% YTD. As per local reports, Dunamu is also exploring a possible listing on the Nasdaq. Other shareholders in the company, Woori Technology Investment Co. (140%) and Kakao Corp. (38%), both of which have about 8% stake in Dunamu, also surged this year.