Coinbase (COIN) received a mixed reception from Wall Street analysts following its Q1 earnings miss and the announcement of its $2.9 billion acquisition of Deribit, a leading crypto derivatives exchange. While some analysts downgraded near-term forecasts due to softening crypto markets, others remain bullish on Coinbase’s long-term strategy.
“Q1 results were weaker than anticipated, with lower-than-expected subscription and service revenue guidance, as well as softer April transaction volumes,” said Benjamin Buddish, analyst at Barclays, who kept an “equal weight” rating on Coinbase. “However, Coinbase’s gains in spot and futures trading market share show its resilience, and we remain optimistic about its long-term prospects.”
Coinbase’s revenue for Q1 dropped 12% compared to the previous quarter, coming in at $2.03 billion, falling short of analyst expectations. Transaction revenue saw a sharp 19% decline, bringing it down to $1.3 billion, raising concerns about the company’s short-term outlook. Several firms, including JPMorgan and Keefe, Bruyette & Woods, revised down their second-quarter and full-year revenue estimates, pointing to lower institutional activity and reduced fee rates as primary drivers of the decline.
While retail trading held steady, institutional revenue took a significant hit. JPMorgan noted that institutional volume fell by 30% compared to Q4, with institutional fees dropping from 4.1 to 3.1 basis points due to incentives, rebates, and a growing presence of high-frequency traders in the market.
Despite these challenges, Coinbase’s $2.9 billion acquisition of Deribit has been hailed as a strategic move to bolster its derivatives business. The acquisition, expected to close by the end of the year, was praised by analysts like Bernstein, which assigned an outperform rating, pointing to Deribit’s impressive $1.2 trillion annual volume and $30 billion in open interest. Canaccord Genuity also issued a buy rating, emphasizing that the acquisition strengthens Coinbase’s international presence and positions the company for future U.S. regulatory approval of crypto options.
Beyond trading, Coinbase is seeing growth in its subscription and services division, which posted a 9% increase, reaching $698 million. The rise in stablecoin adoption has been a significant driver, with USDC balances on the platform surging by 50% to $12.3 billion, while off-platform balances increased by 39% to $42 billion. Canaccord analysts pointed out that average balances per user have tripled since June 2023, reflecting the growing success of Coinbase’s non-transactional revenue streams.
Coinbase’s strategy also includes expanding its “Coinbase as a Service” offering, which provides white-label infrastructure for institutions looking to enter the crypto market. Canaccord analysts believe that this service could become a crucial revenue stream, offering a hedge against trading volatility and further cementing Coinbase’s leadership in the crypto ecosystem.
“Both traditional finance and crypto-native infrastructure players are increasingly interested in a ‘buy vs. build’ strategy, which positions Coinbase’s infrastructure services as a key part of its future growth,” Canaccord analysts said. “Revenue from this offering could provide stability during trading cycles and strengthen Coinbase’s core market positioning.”
However, analysts at Oppenheimer and Barclays highlighted macroeconomic risks, including weak market sentiment and uncertainty surrounding tariffs, which have contributed to lower trading volumes in April and May. The recent roadblock to the GENIUS Act — a stablecoin-focused bill in the U.S. Senate — further complicates the regulatory landscape. Nevertheless, JPMorgan remains optimistic, believing that progress on regulatory clarity will resume before the August recess.
Despite the current market challenges, Coinbase remains committed to its long-term vision and continues to position itself as a cornerstone of the digital asset ecosystem. While near-term volatility and fee pressures may persist, many analysts remain confident in Coinbase’s ability to thrive, thanks to its expanding product suite, strong U.S. market position, and strategic acquisitions like Deribit.
As Canaccord concluded, Coinbase continues to be the “gold standard” for both institutional and retail participants in the digital asset space, even as it faces short-term headwinds.
