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Coinbase Posts Strong Earnings Despite Dogecoin Trading Miss

Coinbase Mizuho
Coinbase Mizuho

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Coinbase, the first publicly-listed crypto exchange, has published its Q1 2021 earnings report.

The largest US crypto exchange’s net profit for Q1 2021 surpassed $771 million, up fourfold from Q4 2020’s number of $177 million.

Revenue stood at $1.8 billion, beating the previous quarter’s $585 million. Alongside from the earnings figures, Coinbase also reported verified active users had risen to 56 million, up from 43 million the previous quarter.

In addition its monthly transacting users (MTUs) more than doubled from 2.8 million to 6.1 million. Coinbase’s trading volume also stood at $335 billion in Q1 2021, while its assets on platform was $223 billion.

BTC Still The Most Traded Asset

According to the report, institutions brought in more money than retail traders. Per the report, $120 billion of the total trading volume came from retail trades, while $215 billion came from institutional investors.

The most popular digital asset traded for the period was Bitcoin. Coinbase’s Bitcoin trades of 39% took the top spot, while Ethereum came second with 21% trades. Other altcoins made up the remaining 40%.

Coinbase’s Q1 came in slightly below market expectations, with earnings per share of $3.05 against market analyst estimates of $3.07 . Its stock valuation also dropped 0.82% to $263.70 in the 24-hour chart in the stock market today.

Worries about rising competitive pressures has seen the stock’s price slide since its direct listing. Analysts are asking if Coinbase’s slow listing process is hurting revenue.

But for now revenue is still booming.

The San Francisco-based crypto exchange said its retail transaction revenue was up by $500 million to $1.5 billion compared to the previous quarter’s revenue. According to the company, this was due to it listing seven new digital assets in 2021.

The ‘Doge’ Effect and Indifference On Fees

Coinbase further confirmed that it would be adding DOGE to its list of supported coins in six to eight weeks.

This is in sharp contrast to other crypto exchanges such as Binance US, which listed the meme coin as far back as February 2021. The listing by Binance of the Shiba Inu-themed token has seen the crypto platform gain even more popularity with crypto investors, who have been flocking to the exchange to trade the coin.

Since the beginning of the year, DOGE had risen more than 10,000%.

In a run-up to the ‘Saturday Night Live’ US TV show, the joke coin surged to a new all-time high (ATH) of $0.78, before retreating following comments from Tesla’s Elon Musk that the coin was “a hustle”. Coinbase’s non-listing of Dogecoin has seen it miss out on a lot of trading fees due to its arguably more vigorous criteria for listing coins.

The latest darling of the meme-loving part of the cryptocurrency community, Shiba Inu (SHIB) coin, is probably not even on the radar of the exchange.

Trade-off for User-friendliness and security

With its substantial customer base and trading fees of 0.5%, which make it the most expensive crypto exchange, Coinbase has lost out on millions of dollars in revenue.

Coinbase’s easy-to-use and secure platform has seen it become the go-to crypto exchange for many US crypto investors and those elsewhere starting out on their crypto investing journey, with such customers willing to pay a premium for its services.

But its high transaction fees mean other exchanges have been gaining a share of the burgeoning crypto trading space. Speaking about the fee structure, Coinbase’s CFO Alesia Haas said that the crypto exchange is not focused on competing on fees but on running a trusted platform that is safe for customers.

According to Haas, the exchange is currently focused on expanding its trading infrastructure to prevent meltdowns during peak trading periods and investing in customer service.

Coinbase’s strategy may be laudable, but other crypto exchanges also provide stable trading platform, but with low fees. A classic example is Binance’s 0.1% trading fee. Also, Binance is a major crypto player with daily trading volume of over $61 billion.

Block.One’s ‘Coinbase Killer’

But Coinbase is not resting on its laurels. Prior to its direct listing, the Bitcoin exchange announced that it would be expanding its operations to India. This is in a bid to compete in the global crypto race.

Meanwhile, decentralised exchange (DEX) platforms are booming. The newest addition is from smart contracts platform EOS blockchain which is planning to launch a DEX called Bullish Global later on in the year.

The initiative has raised $10 billion so far from notable investors like PayPal’s Peter Thiel.

Given the growing competition in the crypto space, Coinbase may have to go back to the drawing board if it wants to remain competitive in a fast-changing crypto landscape.

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