Coinbase, America’s largest cryptocurrency exchange, is expected to go public on April 14, via a direct listing on the Nasdaq exchange with the symbol COIN. Although the proposed quote price is not yet known, investors expect valuations to exceed $ 100 billion, given the strong interest in cryptocurrencies and the company’s excellent earnings for. the first quarter of 2021. In our interactive dashboard Coinbase Income: How Does COIN Make Money? we provide an overview of Coinbase’s business model and the main sources of revenue. Parts of the analysis are summarized below.
Coinbase business model
Coinbase’s platform allows retail and institutional customers to buy, sell, and store cryptocurrencies such as Bitcoin and Ethereum. The company mainly reaches customers through its Coinbase, Coinbase Pro and Coinbase Wallet apps and websites. Coinbase had a total of around 56 million retail users in the first quarter of 2021. Around 90% of the company’s revenue (as of 2020) came from transaction fees related to trading and through services such as storage and trading. analysis. Coinbase charges its customers a transaction fee (estimated at around 0.5%) based on the volumes they trade, with larger transactions leading to lower fees. The company’s commissions are higher than traditional exchanges, given the higher transaction costs for Bitcoin and other cryptos. About 10% of the company’s revenue comes from the sale of its own crypto assets to customers.
How have revenues evolved?
The company’s transaction revenue is highly dependent on the price trend of cryptocurrencies (especially for Bellwether Bitcoin). This, in turn, influences the number of users making monthly transactions on the platform and the total value of transactions. Higher price volatility for crypto assets also generally contributes to income. Total revenue increased from around $ 534 million in 2019 to $ 1.28 billion in 2020, with the company’s number of monthly transaction users increasing from around 1 million to around 2.8 million. during the period, the total volume of transactions increased from approximately $ 80 billion to $ 193 billion. The company had a strong first quarter 2021, with estimated revenue reaching $ 1.8 billion, with transaction volume for the quarter reaching $ 335 billion as the price of Bitcoin nearly doubled since the start of the year, which took the number of monthly active traders from 2.8 million at the end of last year to 6.1 million in the first quarter. That said, it’s probably unrealistic to expect the company to maintain its growth rates in the first quarter for the remainder of 2021, given the cyclical nature of the crypto market. Additionally, rising bond yields and a stellar 8x in Bitcoin prices make the crypto market quite vulnerable to a short-term correction.
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