Coinbase Global Inc, established in 2012, is a leading U.S.-based and globally dominant cryptocurrency exchange platform. It enables retail and institutional investors to trade digital assets like Bitcoin, Ethereum, and Litecoin while offering custody solutions for crypto holdings.
Listed on Nasdaq in April 2021 as the first U.S. crypto stock, Coinbase saw an 86% plunge in 2022. However, 2023 marked a dramatic turnaround, with shares skyrocketing ~200% year-to-date.
Business Model Shift: From Transaction-Centric to Balanced Revenue Streams
Recent filings reveal Bitcoin and Ethereum comprise 32% and 24% of Coinbase’s trading volume respectively, with other assets accounting for 45%.
In Q1 2023, revenue fell 33.8% YoY to $773M, while net profit declined 81.6% to $79M. The crypto winter post-Bitcoin’s 2021 peak ($65K/BTC) led to five consecutive quarters of contracting revenue and losses.
Historically transaction-dependent, Coinbase now demonstrates resilience:
- Transaction revenue rebounded in Q1 2023
- Subscription/service income grew steadily, matching trading revenue
👉 Discover how top institutions leverage crypto markets
Interest Rate Boom Fuels Income Growth; USDC Gains Institutional Traction
Interest income drove 92% of subscription/service growth, hitting $240M in Q1 2023 vs. $10.5M YoY. This stemmed from:
- USDC issuer revenue sharing
- Custodied client funds
- Loan interest
(Powered by rising Fed rates)
USDC—a dollar-pegged stablecoin co-developed by Circle and Coinbase—now outpaces rivals USDT and BUSD in market share growth despite Silicon Valley Bank contagion fears. Advantages include:
- DeFi protocol compatibility
- Lower fees vs. USDT
- Regulatory compliance (75% U.S. Treasuries + 25% cash collateral)
Institutions dominate trading on Coinbase, comprising 85% of Q1’s $145B total volume.
Institutional Holdings: ARK’s Love-Hate Relationship with Its #2 Position
580 institutional investors hold 45.57% of Coinbase shares (~100M shares). Top Q1 2023 holders:
- Vanguard
- ARK Investment
- BlackRock
- Fidelity
Cathie Wood’s ARK remains the second-largest shareholder (6.76% of ARK’s portfolio) but sold 90K+ shares (~$90M) in July 2023 after the rally.
Regulatory Headwinds & Tailwinds
While licensed in 38 U.S. states, Coinbase faces SEC scrutiny over unregistered exchange allegations. A recent court ruling that Ripple’s XRP isn’t necessarily a security may limit SEC oversight—potentially benefiting crypto platforms.
FAQ: Coinbase’s Market Position
Q: Why did Coinbase stock surge 200% in 2023?
A: Crypto market recovery, institutional adoption, and interest income growth from rising rates fueled the rally.
Q: What makes USDC different from other stablecoins?
A: USDC offers regulatory transparency, lower transaction costs, and institutional-grade collateral backing.
Q: Why is ARK selling Coinbase shares?
A: Profit-taking after the rally, though Cathie Wood remains publicly bullish on Coinbase’s long-term prospects.