rewrite this title Coinbase Solidifying Position as Crypto Powerhouse – Nanalyze

Every disruptive technology follows a similar trajectory which is often described using the Gartner Hype Cycle. The “peak of inflated expectations” represents peak hype while the “trough of disillusionment” represents utter despair. However, in the world of cryptocurrencies, these mood swings are business as usual. Nobody wants to buy any bitcoin because it’s down 35% from peak highs. Everyone knows you only buy when it’s making all-time highs, and then immediately question your decision relentlessly any time the price falls in the slightest.

Jokes aside, cryptocurrencies still are an absolute mess of scams, failed projects, thefts, and of course, lots of ransomware. Looking past all that, increasing institutional adoption tells us the crypto movement is here to stay, and that various practical use cases such as stablecoins are seeing real traction. Wanting exposure to this theme makes sense and Coinbase $COIN seems like a sensible way to get it.

Retail Exposure at Coinbase

It’s hard to see how Joe Retail continues to have money after pissing it away continuously on the Robinhood $HOOD money trap du jour – options trading, crapto, prediction markets, meme stocks, all avenues leading to poverty. That’s why we view volatile retail trading activities with a great deal of suspicion and much prefer other pick-and-shovel revenue streams.

Coinbase relies on retail trading for about half of total revenues, a ratio we’d like to see decline over time.

We talked before about how institutional and retail trading volumes are highly correlated, so does that make institutional revenues less valuable? No, because that represents institutional adoption which points to more widespread usage. When institutions decide to start trading an asset, they view it as persistent over time unlike the 50% failure rate for crypto projects. Nobody trades Bored Ape ICOs anymore because the lemmings got bored and moved on to brighter and shinier things. What is a Bored Ape ICO, some of you might ask? Exactly.

In their latest earnings release, Coinbase talks about how, “we’ve diversified our revenue streams, so that it is not just trading specific. We now have 12 products doing over $100 million annualized revenue.” They realize how important it is not to just rely on the fickle whims of Joe Retail. Perhaps one of their most exciting emerging revenue streams would be stablecoins, a crypto use case that’s been lauded by institutional investors as the “clearest evidence” that cryptocurrency is now moving beyond speculation into usage that is compounding because the technology is truly useful.

An Quick Intro to Stablecoins

In the context of today’s discussion, a stablecoin is simply a token that represents one U.S. dollar. The company offering the stablecoin needs to hold a dollar for every stablecoin they supply otherwise the whole thing blows up. Those dollars can then generate interest so the stablecoin issuer can print money simply by collecting the interest. Also, the value of a stablecoin is never worth more than $1 but could be worth less if its not being backed by a dollar.

The world’s largest stablecoin is USDT which commands a nearly 60% market share. It’s offered by a company called Tether which still hasn’t been formerly audited. It almost hurts to type that sentence. The entire cryptocurrency industry just looks past that incredulous fact which can be solved by almost no effort on Tether’s part. Should Tether ever implode, the stablecoin thesis will certainly see a setback while the second-largest stablecoin could pick up the slack.

A company called Circle $CRCL has nearly 25% market share with their USDC stablecoins which are also now directly responsible for all of Coinbase’s stablecoin revenues which grew to 16% of total revenues last year.

Circle and Coinbase

Circle has an interesting past that’s worth rehashing. We first covered them nearly five years ago when they decided to go public using the SPAC method at a proposed valuation of $5 billion. That resolved to a simple valuation ratio of about 78 which came with complex revenue arrangements and heavy customer concentration risk. We decided to pass, and then several years ago Circle tried to go public again and succeeded with an IPO that raised one billion dollars and valued the company at around $8 billion. Today, Circle sports a valuation of $32 billion and annualized revenues of nearly three billion dollars giving them a simple valuation ratio of around eleven (almost twice our catalog average).

If this business model is supposed to be printing money, then why have their gross margins been just under 40% for the past two years? Contrast that with Coinbase who manages a consistent gross margin of 85% over the past several years. There’s also a deeply embedded relationship between the two companies where Coinbase keeps 100% of the interest generated by USDC on their platform and splits the interest 50/50 for USDC off Coinbase’s platform. That’s the significance of the below chart which shows how Coinbase is increasing revenues in both areas.

The relationship works well for both parties. Circle gains massive distribution and credibility through Coinbase, while Coinbase earns high-margin revenue from USDC without bearing issuance/reserve management responsibilities. This key relationship in the crypto community has led to stablecoin revenues now accounting for nearly 48% of Coinbase’s “Subscription and Services” segment, though one wonders just how long this strong growth can persist.

Bloomberg analysts believe there’s a potential 2X to 7X boost in stablecoin revenues coming from ongoing legislation relating to the GENIUS act which Coinbase has been heavily involved in driving. Should that come to fruition at the midpoint estimates, that would be about $6 billion in stablecoin revenues or about 85% of total 2025 revenues. That’s particularly compelling because it means more predictability in Coinbase’s revenue streams. In the meantime, Coinbase isn’t the only firm trying to capitalize on the increasing legitimacy of blockchain technology.

The Competition

Right now, Coinbase seems like the only act in town, though that’s deceptive. They’re simply the largest publicly traded exchange which is likely to change soon. One of the biggest – if not the biggest – crypto exchanges out there, Kraken, has confidentially filed to go public. When an S-1 becomes available we’ll be keen to see how heavily reliant they are on transaction revenues and compare them to the current exposure we’re getting. Since stablecoins are quite an attractive thesis, that’s something unique Coinbase brings to the table.

Another company offering exposure to retail crypto trading is Robinhood $HOOD, though their exposure is more diluted at around 20% of total revenues last year. Crypto trading revenue streams from both companies are highly correlated at around 83% over the past several years.

In looking at the largest crypto exchanges out there, many still remain private so we don’t know what leadership really looks like. Coinbase seems to emphasize the total trading volumes they support which show strong growth and are said to be 6.4% of total crypto volume. Additionally, they talk about “more crypto assets held than any other exchange” with about 12% of all the crypto in the world residing on Coinbase.

We want to see more such metrics that show Coinbase is leading the industry as the go-to platform for anything crypto. The company’s charismatic CEO, Brian Armstrong, always seems to be in the news cycle for some reason or another, though not always in a way we like.

The Recent Results

In putting together this piece, we were looking for an investor deck with key metrics – something we call an “earnings presentation.” Coinbase has now replaced this with a link to some tweet with a video of Brian Armstrong talking for several minutes along with a terse tweet and a few slide images. We’d much prefer a deck that contains key metrics and commentary like literally every other publicly traded company out there, especially for year-end results.

Regardless, we parsed through the company’s 2025 year-end results as well as latest earnings release that was just published. Coinbase tried to spin their recent results a positive light by talking about how “resilient” they are; however the reality is that the company saw their second consecutive quarterly loss due to falling crypto prices. Why didn’t this “resiliency” to show up in the bottom line? Their $394 million quarterly loss is especially painful when you compare it to the positive $66 million profit they had in Q1-2025. While Coinbase doesn’t provide annual guidance, quarterly revenue of $1.41 billion was down roughly 28% year-over-year, pointing to cyclicality and a reliance on crypto prices, especially Bitcoin.

Digging into the earnings release, the company highlighted their prediction market offerings, calling it one of their fastest scaling products ever. While that provides an additional revenue stream for the company at $100 million annually, it’s built on more retail speculation which we’d rather not see. They also highlighted the fact that their derivatives market (a way to hedge risk or speculate on crypto price movements) saw trading volume grow 169% year-over-year. So, more degeneracy.

On the bright side, Coinbase’s proprietary blockchain processed nearly two thirds of global “onchain” (decentralized) stablecoin transaction volume, which points to growing stablecoin adoption and perhaps more stability in revenues in the future should this continue. Ideally, institutional trading revenue and stablecoin revenue make up the bulk of Coinbase’s total sales while the degeneracy is just a little bonus.

Conclusion

Overall, Coinbase remains an attractive way to play the growth of legitimate cryptocurrency projects because they see that transaction revenues are not to be relied upon. It’s also a race to the bottom which is why Coinbase is pushing their subscription offerings which provide more predictability. While prediction markets and derivatives seem like a step in the wrong direction, growing stablecoin revenues should more than offset that added speculation. We’ll be watching for a reduction in dependency on retail trading volume – along with other forms of degeneracy – as time goes on.