Written by: Xiaobing, Deep Tide TechFlow
On May 8, after Coinbase released its earnings report, COIN fell by about 6% in after-hours trading, dropping from around $193 to $182.
The numbers are grim: revenue of $1.41 billion, down 31% year-over-year; a net loss of $394 million, compared to a profit of $65.6 million in the same period last year; adjusted EBITDA plummeted from $930 million to $303 million, a two-thirds decrease; and EPS recorded a loss of $1.49 per share, while LSEG analysts had previously expected a profit of $0.27 per share. This is a complete double whammy.
Even more glaring is that this is Coinbase's second consecutive quarter of losses. Last quarter, it lost $667 million.
But if you only see these things, you'll miss out on the truly valuable information in this financial report, just like most investors.
The "loss" of 482 million was not a real loss.
Of the $394 million net loss, $482 million came from unrealized losses on the company's crypto asset investments, and another $35.2 million came from losses on operating crypto assets. In total, the $517 million loss was all unrealized paper losses; not a single coin was sold.
Under US accounting standards, Coinbase is required to revalue its crypto asset positions at the prevailing market price at the end of each quarter. In Q1, Bitcoin fell from $87,000 at the beginning of the year to around $66,000 at the end of the quarter, a drop of approximately 23%; Ethereum fared even worse, falling by about 41%; the total market capitalization of the entire crypto market evaporated by approximately $600 billion. Coinbase's balance sheet merely passively reflected this market movement.
In other words, Coinbase's holdings remained unchanged; they were simply "revalued" by the market. If Bitcoin rebounds in Q2, this $500 million "loss" will return as a "profit."
If we separate these unrealized losses, Coinbase's true operating situation in Q1 is as follows: Adjusted EBITDA was still $303 million, marking the 13th consecutive quarter with positive EBITDA; at the end of the quarter, it had $10.2 billion in cash and cash equivalents, plus $1.8 billion in crypto assets and tradable investments, giving it $12 billion in available resources.
This is a company that can still generate revenue and has ample resources even during the crypto winter.
The real problem is this: transaction fee revenue has been halved.
If unrealized losses are just noise, then the collapse in transaction fee revenue is the real warning sign in this financial report.
Total trading revenue was $756 million, a 40% year-over-year decline. Retail trading revenue was $567 million, while institutional trading revenue was $136 million, with the latter down 27% year-over-year and the former experiencing a more significant drop. Global cryptocurrency spot trading volume declined by over 20% quarter-over-quarter in Q1, and overall industry activity is nearly half of its peak at the end of 2025. Low volatility has stifled trading, especially for long-tail assets, which are virtually untouched.
Crypto exchanges are a cyclical business, a fact every veteran knows. But for Coinbase, the problem isn't just the cycle; its most profitable segment is structurally weakening. Retail users are leaving, and spot ETFs saw net outflows of $500 million to $800 million in Q1. The money that entered the market in 2024 because of ETFs is now voting with its feet.
Brian Armstrong did not shy away from this issue in the earnings report. He didn't say anything like "the cycle will come back"; he was talking about something else entirely: Coinbase is transforming from a spot crypto platform into a comprehensive asset platform that supports derivatives, commodities, futures, and prediction markets.
This is not public relations rhetoric; it is a fact that has already occurred.
The truly valuable information: 12 product lines with annualized returns exceeding 100 million.
There are a few data points in the financial report that mainstream financial media almost never put in a prominent position, but anyone with even a basic understanding of the industry should pause and take a look:
Retail derivatives revenue exceeded $200 million annualized. Coinbase's market share in US derivatives increased fourfold year-over-year in Q1, and it was the first platform to launch 24/7 US perpetual futures. This is the first time Deribit's acquisition by Coinbase for $2.9 billion in August 2025 has been fully reflected in the quarterly report. Before the acquisition, Deribit had a trading volume of $1.2 trillion in 2024, and set a record with a single-month trading volume of $18.5 billion in July 2025.
The prediction market achieved $100 million in annualized revenue in less than two months. This is the fastest product in Coinbase's history to reach this level, with initial liquidity provided by Kalshi. Another phenomenal story, besides Polymarket, is quietly emerging.
USDC's average holdings hit a record high of $19 billion, while stablecoin revenue bucked the trend, growing 11% year-on-year to $305 million – the only core figure in the report to show year-on-year growth.
Subscription and service revenue was $584 million, accounting for 44% of net revenue. In other words, nearly half of Coinbase's revenue is now unrelated to the current state of the crypto market.
Armstrong provided a figure in the earnings report: Coinbase now has 12 product lines, each with annualized revenue exceeding $100 million, and the prediction market is about to become the 13th. This is, in my opinion, the most important sentence in the earnings report.
An exchange is transforming into a financial infrastructure company.
If you look at Coinbase's actions over the past 18 months as a line, the logic becomes clear:
In May 2025, it announced the acquisition of Deribit for $2.9 billion.
In August 2025, the acquisition was officially completed, instantly making it a leading player in global crypto derivatives (by open interest and options trading volume).
It will be included in the S&P 500 by 2025.
In early 2026, US stock and ETF trading was launched on the Coinbase main app, combining traditional and digital assets into a single portfolio.
On April 2, 2026, it received conditional approval from the Office of the Comptroller of the Currency (OCC) for a national bank trust license.
In Q1 of 2026, the prediction market will be launched, using Kalshi for liquidity.
What this company is doing is redefining itself from a "crypto spot exchange" to a "unified gateway for all tradable assets, both on and off-chain." Armstrong calls this "Everything Exchange."
Why is this necessary? Because the essence of the spot trading business is cycles, fees, and homogeneous competition. Binance is cheaper in the international market, DEXs offer more freedom on-chain, and decentralized perpetual contracts are taking market share from institutions. If Coinbase only focuses on its spot market, it will be slowly eroded.
However, if it combines derivatives, stablecoins, subscriptions, custody, on-chain economics, banking licenses, prediction markets, US stocks, and academia commerce, it will no longer be an exchange, but a crypto-native integrated financial infrastructure platform.
The valuation logic of this kind of business is completely different from that of spot exchanges.
Has the market misjudged the situation?
Let's go back to the fact that COIN fell 6% in after-hours trading.
Short-term traders saw: a net loss of 394 million, revenue halved year-on-year, significantly lower EPS, and Robinhood and Kraken in the derivatives industry also vying for market share. The logic was clear: dump the shares and exit.
However, in the medium to long term, the real message this financial report conveys is:
First, Coinbase's spot trading business is being diluted by its own derivatives and subscription businesses. In other words, this means that Coinbase's beta relative to cryptocurrency prices is declining, a necessary step in its transition from a "crypto proxy stock" to a "fintech stock."
Secondly, the 482 million unrealized loss will rebound as the price of the coin recovers. This isn't a risk; it's a hidden call option. If you believe in the next cycle of crypto, this part is precisely free alpha.
Third, the prediction that the market will achieve an annualized return of 100 million RMB in two months, a fourfold increase in derivatives market share year-on-year, and 12 product lines exceeding 100 million RMB in revenue, together depict not a struggling exchange, but a company that is using the spot market downturn to accelerate the construction of its product matrix.
Crypto is a cyclical business, but great companies are counter-cyclical, building products during bear markets and reaping profits during bull markets. Coinbase's earnings report this quarter is essentially the first act of this script.
