At the beginning of August, the crypto market performed poorly. However, in the second quarter earnings week, the performance of many crypto companies is worth paying attention to.

Coinbase released its second quarter 2024 earnings data after the market closed on Thursday and held an earnings conference call. After the earnings report was released, Coinbase's stock price rose by about 2%, trading at about $212.5, and has risen by about 48% since the beginning of this year. Coinbase CEO Brian Armstrong said that Coinbase's main goal at present is to increase liquidity, increase users, and increase market share.

Despite the decline in overall market trading volume, Coinbase has successfully maintained its steady revenue growth by enhancing service subscription revenue and expanding new revenue channels. It is worth noting that Coinbase also announced the revenue from SOL transactions for the first time, marking a new step in its diversified asset management.

Revenue has been positive for four consecutive quarters, and SOL trading revenue has been displayed for the first time

Coinbase's second-quarter revenue was $1.4 billion, down 11% year-on-year, almost the same as analysts' expectations of $1.37 billion. Net profit fell from nearly $1.2 billion in the first quarter to $36 million, and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $596 million. Coinbase has achieved positive revenue growth for four consecutive quarters.

Coinbase's total trading volume in the second quarter was $226 billion, down 28% year-on-year, and trading revenue was $781 million, down 27% month-on-month. Subscription and service revenue increased 17% month-on-month to $599 million. Total operating expenses were $1.1 billion, up 26% from the previous quarter, while technology and development, general and administrative, and sales and marketing expenses totaled $850 million, up 14% from the previous quarter.

It is worth mentioning that Coinbase's custody fee revenue in the second quarter was $35 million, up 7% year-on-year. The main driving force was that the average crypto asset price in the second quarter was higher than in the first quarter, and it also benefited from the related fund inflows as the custodian of its BTC ETF product. In addition, Coinbase generated $240 million in USDC stablecoin interest income in the second quarter, up 22% year-on-year.

In terms of trading volume, Coinbase also showed Solana's trading revenue for the first time.

Trading volume drops, but revenue stickiness increases

Compared to the end of the first quarter, the total market value of cryptocurrencies fell by 11% month-on-month at the end of the second quarter. With the launch of the BTC ETF product, the price of crypto assets rose at the end of the first quarter, and the average market value of cryptocurrencies increased by 20% month-on-month during the same period. However, when comparing the second quarter average with the first quarter average, the main driver of revenue, namely the volatility of crypto assets, fell by about 13%, resulting in Coinbase's second quarter cryptocurrency spot market trading conditions being weaker than the first quarter.

Trading revenue benefited from the growth of derivatives trading and Coinbase Wallet transaction fees. Coinbase started charging Coinbase Wallet in the second quarter after a favorable court ruling on the motion to dismiss.

In addition, it is worth noting that Base's sorter revenue (other trading revenue) revenue was $53 million, a 6% decrease from the previous quarter, but this was due to a decrease in Base sorter fee revenue. In the second quarter, due to the Ethereum Cancun upgrade, Base fees were significantly reduced, but this helped boost the number of Base transactions by 300% month-on-month.

While Coinbase's transaction revenue fell 27% month-on-month, it "made good progress" in diversifying its revenue sources, with subscription and service revenue reaching nearly $600 million, up 17% month-on-month, a stickier source of revenue that Coinbase has been eager to grow.

Transaction Revenue vs. Subscription and Service Revenue

This is reflected in the 300% month-on-month increase in the number of transactions on Base, the expansion of USDC through partnerships and compliance with Stripe, the launch of smart wallets, improvements to simple and advanced transactions, and derivatives products for Coinbase Financial Markets.

Blockworks analyst Mippo said, "From the perspective of someone who once doubted whether he could transform from trading income, USDC, staking and Base are huge businesses in themselves, and they are just getting started."

This can't help but recall that in the second quarter of 2023, Coinbase's trading revenue was surpassed by "subscription and service" revenue for the first time. BlockBeats once analyzed that this means that the revenue structure of crypto exchanges is changing, which may redefine the current cryptocurrency landscape. After nearly a year of development, the crypto market has come a lot closer to the mainstream financial market, and Coinbase has also made many efforts at the level of crypto trading products.

Armstrong said in the earnings call that "Coinbase will continue to try to work with every fintech company, every bank, and even more traditional companies to try to integrate cryptocurrency into every part of the global financial system."

This is not an empty talk. On June 28, Coinbase announced a partnership with payment giant Stripe to increase on-chain adoption and provide faster and cheaper financial infrastructure.

Stripe will add support for Base to its suite of crypto products to provide users with faster and cheaper remittance services, while Coinbase will add Stripe's fiat-to-cryptocurrency entry to Coinbase Wallet to allow users to buy cryptocurrencies immediately with credit cards and Apple Pay.

At the end of July, sources said Coinbase Asset Management (Coinbase Asset Management) was preparing to create a tokenized money market fund to enter the RWA field. In addition, Coinbase has partnered with financial services provider Apex Group to help promote the development of its tokenized fund.

Written at the end

In the shareholder conference call, an analyst asked, "Can you update Coinbase's asset management strategy and potential product roadmap, and considering the improvement of the political environment in the upcoming election, how does this affect Coinbase's decision to launch products? "

But Coinbase CEO Brian Armstrong did not directly state what kind of updates Coinbase will make at the product level in the future when answering this question, and only explained that its improvement in the regulatory environment will inject new vitality into the industry. He cited the example that institutional clients have 1%, 2% or 3% of their portfolios in cryptocurrencies, and when there is regulatory clarity, this ratio will reach 10%, 20%, and 30%.

On July 26, Coinbase announced the addition of three new board members, including OpenAI executive Chris Lehane, former U.S. Deputy Attorney General Paul Clement, and Aon Chief Financial Officer Christa Davies. The addition of new members is intended to help Coinbase exert its influence on US encryption policy and enhance its global financial and operational capabilities. Coinbase said that the three new members have different political ideas and that ensuring the success of the cryptocurrency industry requires bipartisan cooperation.

On July 28, the Financial Times quoted sources as saying that advisers to U.S. Vice President Kamala Harris' campaign team have been in contact with key figures in the crypto industry to build relationships that could ultimately inform the development of a regulatory framework.

The report said that in recent days, they have been communicating with Coinbase, Circle and Ripple Labs. Through the statements of Coinbase executives in this conference call, perhaps we can expect crypto regulation to make breakthroughs in this cycle.

At the same time, Armstrong expressed his hope to see a "Coinbase 500" product like the S&P 500 in the conference call. Although it is difficult to find 500 trustworthy cryptocurrency products under the current market conditions, it is a blessing for the entire industry to have such a vision.

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