Coinbase (COIN), the largest cryptocurrency exchange in the United States, just announced second quarter earnings. This was highlighted by $2.0 Billion in net revenue for Q2, up 27% from Q1, and 12 million verified users, bringing the total customer base to 68 million. Its net income grew from $771 million Q1 to $1.6billion Q2, an increase of 108%.
Tuesday’s earnings release marks the second one-day earnings report by the company since April’s public debut. As in the last quarter, the majority of the company’s revenue came from transaction processing. The $2.0 billion revenue came from transaction processing. $1.9 billion was derived from subscription revenue and the rest from services revenue. Net revenue was $1.6 billion in Q1. It included $1.5 billion in transaction revenues and $56.4 millions in subscription and service revenue.
These record numbers contrast with the crypto market’s performance in the last three months. This is mainly due to further regulatory crackdowns by China, Tesla stopping its acceptance of Bitcoin as a payment option, and concerns about record levels of inflation, which would force central bank to tighten their monetary policies.
Analysts will examine COIN’s second quarter for potential signs of a break from its close relationship with bitcoin. In April 2021, the largest ever direct listing of bitcoin exchanges, COIN, was about to surpass its record $64,654. COIN reached a high of $429. The crypto market has reversed its course since then. This was punctuated with bitcoin falling below $30,000, and COIN plummeting to a low level of $208. The market has since rebounded. Bitcoin now trades at $45,582 while COIN has reached $269. This is nearly 40% lower than its record-breaking four-month-old high.
Many analysts will assess whether Coinbase’s expanding range of trading pairs will make it the diverse crypto investment opportunity that many were expecting.
Positive sign is that trading volume in Ethereum has exceeded that in Bitcoin for the first-time. Coinbase supported $335 Billion worth of trading volume in Q1 2021 with bitcoin and Ethereum, which accounted for 39% and 21% respectively. Quarter two saw total trading volume jump to $462 billion, but ether’s volume (26%), was more than bitcoin’s (24%).
Despite the impressive growth in crypto markets and their strengthening, there are still challenges. Gary Gensler, Chairman of Securities and Exchange Commission, stated earlier this month that regulators needed more power to regulate cryptocurrency products. This signaled his willingness to play a greater role in shaping crypto policy. The recent addition of tax reporting requirements for everyone, from crypto software developers to bitcoin miners, could lead to a decrease in investor enthusiasm.