Coinbase’s earnings report today was celebrated by investors who poured a lot of money into one of its global competitors. Coinbase today is actually Coinbase’s earnings Day. Private investors pushed $210 million into an alternative exchange.
FalconX is now valued at $3.75 Billion. Bloomberg points out that this is a 5x increase in valuation in just half a year. FalconX raised $50 million in a smaller round in March, thanks in large part to Coinbase Ventures.
It should not be surprising that the FalconX news is out. Indian cryptocurrency exchange CoinDCX has just raised $90million, achieving a valuation of $1 billion. Pintu, an Indonesian cryptocurrency exchange, raised $35 million this weekend. Earlier this year, FTX, a Hong Kong-based cryptocurrency exchange, raised $900 million at a $18 billion valuation. Other examples exist.
Investors are not to blame for their pursuit. Coinbase is a powerful business, especially when crypto interest is high. According to its latest 10-Q filing, trading revenues at the U.S. cryptocurrency exchange rose to $1.8 Billion in the first quarter 2021. Coinbase generated $771.5 million in net revenue. Coinbase made $3.05 per share of equity diluted.
It was a remarkable result. Investors expect Coinbase to report revenue of $1.77 billion to 1.83 billion, depending on the analyst summary that you prefer. Earnings per share will be around $2.57. Given the Q1 results, it is easy to figure out what net income this EPS number represents.
Some would argue that Coinbase’s current results would set the tone for private sector venture investment and valuations of other crypto exchanges. The concept of Coinbase seems a bit moot due to the amount of money that has been invested in a number of startups across the globe who are trying to create the Coinbase of the market.
Coinbase’s earnings, comments and market analysis will help us better understand the crypto-exchange landscape. However, this is a U.S.-centric view. As a data point, Coinbase generated 81% of its revenue from its domestic market in the last quarter.
However, that doesn’t mean there isn’t fun to be had. We can calculate trading volumes and valuations. We can use Coinbase’s trading volume data to compare other exchanges and find which ones seem more expensive or less expensive. Let’s get started. Let’s get into the numbers!
Trading volume as revenue proxy
Coinbase’s 10-Q filing for the quarter ended March 31, 2021 shows that trading volume was $334.74 Billion, an increase of 1,022% over its Q1 2020 figure of $29.83 Billion. It also reported that it generated $1.54 billion in transaction-trading revenues during the period. Coinbase reported that it generated approximately $0.0046 per $1 of traded crypto during the period.
It should be obvious things are moving into the realms of speculative mathematics. This means that all we do today is directional and not absolute. While our goal to see how other exchanges are valued on the basis of their trading volume will be helpful, it is not definitive. To gain full confidence, we will need to wait for additional S-1s and other similar filings.