Coinbase took a haircut in revenue last quarter just as competition in crypto is mounting.
On Thursday, the biggest crypto exchange in the US reported income of $1.5 billion, a 25% drop from last quarter, and about 6% below expectations. Shares for the company plunged 9% in after hours trading.
All of this comes at a time of impressive competition for Coinbase — pushing the company to expand its product line well beyond retail trading.
To be sure, Coinbase competitors also showed less-than-ideal numbers in their quarter earnings. Kraken’s revenue slumped, while Robinhood declined in crypto revenue for the second consecutive quarter.
Mounting competition
Even so, Coinbase’s competitors are circling.
Kraken launched stock trading for its 15 million customers, while planning to acquire trading giant NinjaTrader for $1.5 billion.
It is also reportedly on the verge of raising $500 million at a $15 billion valuation and is said to be planning an initial public offering in the first quarter of next year. Kraken has not confirmed the reports.
Meanwhile, fintech giants Robinhood, Revolut, and eToro have been encroaching on Coinbase by expanding their businesses to include crypto products. Binance could be preparing a return to the US.
And that’s just the freshmen.
Incumbents aren’t staying put either. Executives at Bank of America, BNY Mellon, and Morgan Stanley have been touting the promises of blockchain and cryptocurrencies — while eyeing up what they can offer their clients.
Coinbase steps up
But Coinbase hasn’t been resting on its laurels.
On Wednesday, it inked a watershed deal with JPMorgan Chase, the No.1 US bank, to allow bank customers directly link their bank accounts with the crypto exchange.
In May, the company acquired derivatives giant Deribit for $2.9 billion. It’s a deal, market watchers said, that indicates a bet on the next wave of crypto investors.
Last month, the firm signed a partnership with Shopify to bring stablecoin payments to the e-commerce giant.
Those are all signs of Coinbase building a platform “where financial services, identity, rewards, gaming, and media converge,” Le said.
Coinbase also has a structural advantage: regulation.
Clearer regulatory waters mean wind in Coinbase’s sails.
“That structural advantage will matter more than quarterly volatility,” he said.
Regulators are one thing, the other is DeFi.
Coinbase has spent a lot of time, and money, into Base, its Ethereum layer 2 chain. Base is now the second largest layer 2, with $14 billion in total value locked, according to L2Beat.
The layer 2 has been swallowing up market share in the DeFi ecosystem, elbowing out competing blockchains who once commanded the space.
For Le, Base is key to the company’s long-term edge.
“The more activity Coinbase drives through Base — whether that’s transactions, apps, or games — the more network effects it captures,” he said.
“It becomes harder to compete with.”
Core infrastructure
Still, Le reckons that Coinbase has a lot more room to run.
“This is no longer just a crypto exchange,” Le said. “It’s becoming infrastructure for the internet of money.”
That means embedded wallets. Payment rails. Onchain apps. It means Base becoming the go-to chain for developers. And it means Coinbase positioning itself as the default trusted brand in a post-regulatory-crackdown world.
What is keeping Coinbase ahead could also be its downfall, however.
If Coinbase neglects the shift toward wallets and onchain activity, it could fall behind. Others — including MetaMask, Phantom, or even fintech players — are staring down the same opportunity, Le said.
Ultimately, the race will be won by the platform that combines regulatory trust, user experience, and ecosystem depth, Le said.
“Coinbase is well positioned but has to keep expanding the scope of what users do onchain.”
Still, with Coinbase’s earnings came at lower than expected, it wasn’t a disaster.
What matters more to investors is traction, Le said.
“Is Base growing? Are user deposits increasing? Is institutional custody share expanding post-ETF approvals?”
