Comment by mdasen | Hacker News Reader

Comment by mdasen | Hacker News Reader

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If you're looking at trailing 12-months it isn't negative yet. I can't predict the future so I don't know if they're going to continue losing money or if this is just one negative quarter.

I don't know much about what is "hot" in crypto exchanges, but FTX is saturating sports commercials and getting high-profile endorsers like Steph Curry and Tom Brady and sponsoring the Miami Heat arena. Crypto.com has the naming rights for the area that hosts the LA Lakers, LA Clippers, LA Kings, and LA Sparks as well as sponsorships of the Philly 76ers, Montreal Canadiens, UFC, and the 2022 FIFA World Cup.

Even if you believe strongly in crypto, Coinbase seems to be losing mindshare to competitors who are spending big. While some marketing spending might be considered foolish by some (I already know that Gillette exists and generally know what razors are available), with crypto they're probably targeting a lot of customer acquisition in a very new market. If FTX and Crypto.com become the faces of crypto to every sports fan looking to buy crypto, that seems like it would be a problem for Coinbase.

Coinbase might be better or worse than those other two, but as someone who has been watching sports I can tell you that FTX and Crypto.com are very front-and-center. If crypto is looking to attract lots of new buyers, it seems like FTX and Crypto.com are doing the marketing to make them first in people's heads.

Judging by the report, Coinbase is going after more institutional investors with 17% SME, given they are $235/209 B of trading volume. I don't blame them - retail is even more finicky, and I won't be surprised when FTX and Crypto.com have been supplanted with something else in 10 years. Though I would just avoid this industry all together!

I could definitely see FTX and Crypto.com not having staying power - many companies that spend lavishly on sports sponsorships see it come back to bite them. However, over the next few years it seems likely that FTX and Crypto.com will win a lot of the growth coming from non-techies. That's not great for Coinbase.

I'm a bit skeptical of the institutional play. $47M in institutional transaction revenue is a lot lower than the $966M in retail - even after retail took a nose-dive from $2.2B. Plus, institutional revenue also seems to have taken a nose-dive from $91M to $47M. It seems like institutional investors are being just as fickle.

Notably, it doesn't seem like retail is souring on Coinbase. They have $123B in retail assets which is down from $141B in Q4'21, but up from $116B/$88B/$101B in Q3/Q2/Q1 2021. Their institutional accounts are pretty steady at $122, $92, $139, $137, $134B for the past 5 quarters, but it's not like their retail assets aren't pretty stable.

It does seem like people (retail and institutional) aren't transacting as much. Transactional revenue is down 56% and trading volume is down 44% (which probably accounts for most of the drop in transactional revenue).

If their business model is based off transactions and people are buying and holding their crypto, that's not a great position for Coinbase.

As I've said in another comment, I'm definitely not an authority on what is hot in crypto exchanges, but I'm skeptical they'll be able to get enough revenue from institutional investors where they're getting $47M in transaction revenue for $235B in transaction volume while they're getting $966M in transaction revenue on $74B in volume from retail. That's 0.02% from institutional and 1.3% from retail. That is a humongous difference in the fees there. If they did $2.3T in transactions for institutional, would they only get $470M in transaction revenue? A 10x increase in transactions while still being half of retail revenue?

Similarly, I'm avoiding the industry. There's too much uncertainty for me. Maybe people are just holding their Bitcoin, but will return to transacting in the near future. Maybe we're going to see long-term lower volume. Who knows.

A drop in retail assets north of 10% in a quarter does not sound like stability to me, especially for a company spending like they are in hyper growth mode. It sounds more like an existential risk to the business.

FTX is literally everywhere.

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