SBF Profile picture
Aug 9 10 tweets 3 min read
1) Some thoughts on Coinbase's 2022Q2 earnings!…

2) A lot of the same mistaken takes on it.

First, crypto's down. So are Coinbase's earnings. Nothing surprising there, and nothing Coinbase specific.
3) Second: the quarterly "look at that diversified income!" take.

Coinbase knows what they're good at: consumer crypto investing/trading.

That's where all their profit comes from.

"But how about that Services revenue?" Nah.
4) See, while they recorded ~$150m/$800m of their revenue as "services"...

...check out their opex.

See that "Transaction expense" of $167m? I'm pretty sure that includes items offsetting much of the services revenue; it's passthrough to customers from e.g. ETH staking.
5) So their real revenue was probably closer to the $650m Transaction revenue.

Once again, over 90% of that comes from retail, because of the pricing differences between the (retail) mobile app and the (mixed) website/exchange.

So, netting out the ~$150m...
6) You get a revenue of ~$650m, and expenses of...


a) $150m of marketing
b) $600m of dev payroll
c) $500m of other payroll
d) $100m of 'other'
e) $400m of balance sheet asset price decline

for a total of ~$650m rev, ~$1.4b core expenses, plus $400m impairment.
7) That leads to a loss of roughly $700m, plus another $400m from impairment.

My guess is the vast majority of the expenses are coming from payroll/bonuses/etc. here.

Coinbase has ~5k FT employees, paying roughly $4b/year for them. (Makes sense, for devs.) Revenue now ~$2.5b.
7) I *think* this include stock-based-comp.

So, roughly speaking, *annualized*, Q2 would imply:

a) $2.5b of real net revenue (~90% mobile app trading fees)
b) $4.4b of employee comp
c) $1b of other expenses

--> on net, losing roughly $3b/year, including stock based comp
8) It'll be interesting to see the impact of their recent headcount changes on upcoming earnings!

FWIW I highly recommend Brian's well-written post on it:…

And macro. Remember: Coinbase is more sentiment-dependent than FTX! Large upside in a recovery.
9) (Not investment advice! There might be errors in the above, I haven't double checked it all!)

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More from @SBF_FTX

Aug 3
1) I'm really excited to see @SenStabenow and @JohnBoozman introduce a strong bill to bring customer protection and federal oversight to crypto.…
2) The bill, cosponsored with @CoryBooker and @SenJohnThune, is complementary with the @CongressmanGT / @RoKhanna house bill and the previously released @gillibrandny / @SenLummis bill.

It would provide clear federal oversight to digital asset commodity markets.
3) We would find it constructive and healthy to register under such a regime, finally bringing comprehensive customer protections and oversight to spot crypto commodity markets in the US.

It would help strengthen liquidity, while fighting against bad actors in the ecosystem.
Read 4 tweets
Jul 25
1) Voyager lost customer assets, but it still has the majority left.

Why haven't those been returned to customers yet?

Sad facts from a bankruptcy process.
2) Let's say that Voyager has, remaining, 75% of assets (I don't know the exact number).

It seems like the first thing that should happen is that customers get back the 75%, and then later get back the rest if anything is recovered from 3AC.

But that hasn't happened yet. Why?
3) Well, the *traditional* process is that before customers get their assets back, they get fucked.

First, there's a long, drawn out process, during which funds are frozen. It can take years.

Remember Mt. Gox? That process is *still going on*.
Read 15 tweets
Jul 16
1) To what end?

Some potential use-cases for crypto.

For the sake of this thread, I'm going to ignore uses like "you can buy tokens and maybe they'll go up".

Instead I'll focus on three:

a) payments
b) market structure
c) social media
3) Let's start with payments, both domestic and international.
Read 40 tweets
Jun 21
1) Today we’re injecting $250m into BlockFi and partnering with them so they can navigate the market from a position of strength.

2) BlockFi has careful risk management and great leadership.

So they successfully removed at-risk counterparties preemptively.

BlockFi customer assets are appropriately managed, with no debt/risk from 3AC, Celsius, etc.
3) Sometimes leadership means acting decisively and that’s what BlockFi did: removing troublesome counterparties _before_ they become a problem, and adding cash _before_ it was necessary.
Read 6 tweets
Jun 6
1) Zig Zag and hiring:

why FTX is going to keep growing as others cut jobs
2) A few months ago, when BTC was $44k, I wrote a document which lead with:

"Today, February 8th, 2022, I’m not announcing a hiring freeze.

Which, in many ways, makes it like every other day.

But I think it’s time for us to substantially slow down hiring for a bit."
3) But before we get there, let's start in 2018.

One of the first lessons I learned as a CEO:

Make sure your team can mentor employees as fast as you hire them.

Otherwise, as I learned the hard way, everything gets worse.
Read 19 tweets
May 25
1) some responses to comments at round table because there won’t be time to say them all:
2) capital is also present in direct systems; we’ve already put up $250m just for 2 contracts.

Also it’s only 8% of margin in traditional systems as stated by CME, so not the main piece.
3) “traditional model hasn’t had any problems” —CME

LOL nickel
Read 50 tweets

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