Thread by @lawmaster

1/ Today I wrote about Coinbase and why I think they have a very tough road ahead financially. Quick summary of a paid article below:

theblockcrypto.com/2019/03/18/coi…

2/ Overall, the volumes across the market are down down more than 80% from an all-time high in December 2017

3/ Hirji said in October that Coinbase’s revenues were “100% transactional” and that Coinbase is actively looking to diversify its revenue streams with its suite of institutional products, which are “more fee-based or AUM-based”

4/ According to a document reviewed by Bloomberg in October, Coinbase had projected $1.3 billion of revenue in 2018, though whether they hit their target remains uncertain. In 2017, Coinbase generated $923 million in revenue.

5/ In 2017, Coinbase had traded volume of $71 billion while generating $923 million in revenue, which means that 1.3% of the total volume was revenue.

6/ What’s concerning for Coinbase is that volume (and therefore revenue) is extremely seasonal. Approximately 61% of Coinbase’s 2017 revenue came from just two months — November and December. In 2018, 55% of revenue came from the first three months of the year.

7/ The problem is that February 2019 volume is only a little more than 6% than what it was at the peak in December 2017. In fact, the volume in December 2017 is roughly equivalent of the volume Coinbase recorded in the last nine months combined.

8/ In the last 9 months, Coinbase brought in an average of $3.46 billion in monthly volume. If we make the (somewhat likely) assumption that the market conditions stay relatively the same in 2019 as in the last nine months, we can estimate Coinbase’s volume for the year

9/ If the bull market doesn’t come back and the volumes stay relatively the same, Coinbase’s forecasted volume in 2019 would be approximately $39 billion. That means that the revenue from trading commissions would be only $545 million in 2019.

10/ If the bull market doesn’t return and the market conditions remain similar, it will be extremely unlikely that Coinbase generates larger revenue than in 2018. And if the revenue falls significantly YoY, going public will be a much tougher sell