2) First, let's not bury the lede.
Coinbase brought in $2B of revenue in 2021Q2.
That's a lot.
Coinbase brought in $2B of revenue in 2021Q2.
That's a lot.
3) I almost wanted to end the thread there, because I really do think that's the headline result!
But there are a lot of other interesting tidbits.
But there are a lot of other interesting tidbits.
4) First of all, where does that revenue come from?
Most analyses I've read of this get it wrong.
They'll talk breathlessly about the growth in subscription revenue (82%!) and point to custody, staking, etc.
But that's not the right way to think about it:
Most analyses I've read of this get it wrong.
They'll talk breathlessly about the growth in subscription revenue (82%!) and point to custody, staking, etc.
But that's not the right way to think about it:
5) Their "transaction revenue" (trading fees etc.) was $1.9B.
Their "subscription revenue" (custody, staking, etc.) was $0.1B.
Their subscriptions grew quickly! But that's still just 5% of revenue.
95% is trading fees.
Their "subscription revenue" (custody, staking, etc.) was $0.1B.
Their subscriptions grew quickly! But that's still just 5% of revenue.
95% is trading fees.
6) To be fair, I've been guilty of this too. I'll talk about growth metrics in FTX's margin borrow/lending book, but the truth is that, for FTX--like Coinbase, and like most crypto exchanges--most of the revenue comes from trading fees.
7) Another interesting thing to note here: retail vs institutional.
In Q2, Coinbase made $1.8B on retail fees, and $0.1B on institutional fees.
So 90% of their revenue is from retail trading fees, 5% instos, and 5% custody/staking.
In Q2, Coinbase made $1.8B on retail fees, and $0.1B on institutional fees.
So 90% of their revenue is from retail trading fees, 5% instos, and 5% custody/staking.
https://twitter.com/SBF_FTX/status/1348966954980134912
8) Again, reports will talk a lot about the institutional clients Coinbase is winning, and that really is important to the future of their business!
But I think they often miss the numbers here.
When it comes to retail, Coinbase blows everyone else out of the water.
But I think they often miss the numbers here.
When it comes to retail, Coinbase blows everyone else out of the water.
9) In fact! In 2021Q2, Coinbase made $100m revenue on institutional trading fees.
FTX made... $100m.
I'm actually not sure which made more on institutional trading fees; they're within a few % of each other.
But on retail, Coinbase is massively bigger than FTX.
FTX made... $100m.
I'm actually not sure which made more on institutional trading fees; they're within a few % of each other.
But on retail, Coinbase is massively bigger than FTX.
10) How about expenses?
Coinbase's are... impressive.
Coinbase's are... impressive.
11) Coinbase had $1.3B of expenses in 2021Q2 alone. Removing one-time costs (e.g. listing), its revenue was $2B and its EBITDA was $1B.
So they had about $1B of expenses in 2021Q2, for a run rate of $4B/year.
So they had about $1B of expenses in 2021Q2, for a run rate of $4B/year.
12) This is roughly evenly distributed between
--"transaction expenses" (gas?)
--Tech
--Marketing
--Payroll
They spent roughly $250m on each.
They had ~2k employees, so that implies ~$400k/year/employee, which makes sense given the workforce.
--"transaction expenses" (gas?)
--Tech
--Marketing
--Payroll
They spent roughly $250m on each.
They had ~2k employees, so that implies ~$400k/year/employee, which makes sense given the workforce.
13) For context, FTX's expenses in 2021Q2 were around $50m (excluding buy/burn).
The big differences were.... I guess everywhere?
I guess 5% of the expenses aren't surprising given we also have 5% of the employee headcount.
The big differences were.... I guess everywhere?
I guess 5% of the expenses aren't surprising given we also have 5% of the employee headcount.
14) One of the biggest questions I've been thinking about recently:
Big companies tend to have big teams.
Is that necessary? Is that correct?
What happens if you try to build a big company with a medium sized team?
Is it efficient and nimble, or is it just overloaded?
Big companies tend to have big teams.
Is that necessary? Is that correct?
What happens if you try to build a big company with a medium sized team?
Is it efficient and nimble, or is it just overloaded?
15) Note that 2021Q2 was probably an unusually good quarter for Coinbase! Volumes and volatility were high.
I would expect Q3 to be lower.
I would expect Q3 to be lower.
16) Finally, you wonder why you hear so much about crypto exchanges versus other exchanges?
I'll just leave this here.
https://twitter.com/SBF_FTX/status/1415096884960526341
I'll just leave this here.
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