Thread by @eriz35

Short Coinbase $COIN - Mini Thread

1/ Quick thesis/summary after convo with @LSValue and @Pigeonomics yesterday

I have no position and will have no position.

2/ Super simple business. Ignore the Visa cards, the DeFi, etc. This is a simple business. Coinbase facilitates the exchange of cryptocurreny for real USD. Their fee structure is, for all intents and purposes, close to equal across the board

3/ 91% of revenue is transaction fees to retail. So the blend of higher margin retail to (presumably) lower institutional revenues doesn't really matter

4/ Bitcoin trading volumes are the bulk of the transactions so we'll ignore the doge/eth/other shitcoins since presumably volumes of all crypto scales as the assets are highly correlated

5/
Data per bitcoinity.org:
Q1 2021 BTC Trade Volume = $103.6 billion
Q2 2021 BTC Trade Volume = $86.7 billion

a QoQ decrease of ~16%

6/
Income is high in fixed costs so that revenue loss goes straight to the bottom line. That's -$255 million in revenues. Quick estimate is that a few institutional big trades and addition of Doge netted another $55-70 mm, So say QoQ down $200 mm

7/ Here's the kicker. 7 day rolling USD bitcoin trading volume at Coinbase is at December 2020 levels

8/ Management will likely have to guide down forward earnings and revenues.

$IBKR trades at 2.8x book and 2.3x revenues
$COIN trades at 22x book and 18x sales

The businesses are no different, fundamentally. Coinbase had 30% margins in Q1, during historic bull run

9/ Forget BTC fundamentals. This is a 63 billion dollar company that is looking to shrink in it's first year after going public. And let's not forget the insider sales.

$COIN