Coinbase’s Institutional Volume Surges 47% to Dwarf Retail in Q2 But Accounted for Less than 6% of Revenue

Coinbase’s customers, which increased by 12 million and includes 10 out of the top 100 hedge funds by AUM, traded Ether (26%) more than Bitcoin (24%) in the second quarter of 2021 for the first time.

Coinbase has beaten the expectations by reporting a “strong” Q2 that saw an increase of more than 1,500% in its quarterly trading volumes but forecast a drop in current-quarter volumes/ While volume slightly improved compared to July levels, it remained lower than earlier in the year.

For the quarter ended June 30, the company’s trading volumes rose to $462 billion, from $335 billion Q1. Bitcoin accounted for 24% of this trading volume, down from 39% in the quarter ended March, while ETH leads with a 26% share for the first time.

“Growth in retail Trading Volume was driven by higher MTUs, a strong crypto market environment, product innovation, and our ability to support more assets for trading.”

Share-wise, institutions accounted for 69% ($317 billion) of this volume while retail only accounted for just $145 billion of this compared to 64% ($215 billion of total $335 billion) share of institutions and retail contributing $120 billion in Q1.

Institutional trading volume saw an increase of 47% compared to Q1. In the quarter, “Institutional onboarding to the Coinbase platform increased rapidly as well as higher capital allocations into crypto,” it said.

Coinbase also said that 10 out of the top 100 hedge funds by asset under management (AUM) are its customers. The exchange named Elon Musk, PNC Bank, SpaceX, Tesla, Third Point, and WisdomTree as its partners.

“Adoption continued at a rapid pace throughout the quarter despite market volatility.”

Continued Growth

According to its shareholder letter, the San Francisco-based cryptocurrency exchange posted a net income of $1.59 billion, or $6.42 per share, for the quarter ended June 30.

Second-quarter revenue was nearly $2 billion, with the vast amount coming from retail in the form of transaction revenue. It compares to $1.54 bln in Q1 of this year and $467.4 million in Q2 2020.

Interestingly, while institutions dominate the volume, Coinbase earned $1.82 billion (94.3% of total $1.93 bln) in transaction revenue from retail while earning only $102 million from institutions.

Coinbase’s other revenue sources include “subscription and services revenue,” which accounted for a total of $102.6 million, $39 million in “blockchain revenue,” $31.7 million in custodial fees, and $16.9 million from Earn campaigns.

Coinbase further reported $180 bln in assets — $88 billion from retail and $92 billion from institutions in Q2. 47% of the total assets were in BTC, while ETH made up for 24% of it.

The exchange also reported growth of 44.2% in the monthly transacting users (MTUs), up from 6.1 million in Q1 to 8.8 million in Q2.

“Q2 MTU growth was driven by the crypto market environment, product launches, 
 our marketing efforts, and the growing number of crypto assets we support.”

Focus On Regulation & More Assets

Going forward, Chief Financial Officer (CFO) Alesia Hass said they are paying close attention to the U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler’s comments, who called for more authority to better regulate the crypto sector, especially DeFi.

“We’re eager to understand the legal framework for the concerns that he has raised and how any of those may impact our product roadmap,” Haas said in a post-earnings conference call.

The exchange also reiterated that it plans to grow the number of crypto assets listed on its platform. CEO Brian Armstrong says that he wants Coinbase to be the “Amazon of assets” and list every legal crypto on its platform.

The share price of Coinbase, which went public via a direct listing in April, is trading around $284.49.

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