What’s going on?

• Coinbase’s (crypto exchange) first ever quarterly result as a public company surpassed analysts’ expectations – 10 times yoy, totaling an impressive $2b;
• But the exchange expects suffering as token prices stabilize.

What does this mean?

• Crypto markets experienced some of their wildest swings last quarter, with investors trading fast-moving digital currencies on Coinbase’s platform. This drove Coinbase’s monthly active users up by 44% compare to 1Q, reaching nearly 9 million.
• However, Coinbase warned that declining crypto price volatility in 3Q has begun to slow down user activity, which is likely to hit its future financials.

Why should I care?

The bigger picture: High risk high return

• The $2b-quarterly-revenue is even more impressive for the 9-year-old crypto exchange to have taken in more cash than established marketplace operators like CME Group and Intercontinental Exchange.
• However, a large proportion of Coinbase’s revenue comes from trading in a single cryptocurrency – bitcoin. That makes its sales a lot riskier than traditional exchanges, where revenue is more balanced across different assets.

Zooming out: Threats are present anywhere

Crypto markets face constant threats from new government regulation and malicious hacks. For example,

• The US president has proposed infrastructure bill, which promises to impose stricter tax reporting requirements on crypto brokers.
• Cyberpunks had pulled off what could be decentralized finance’s biggest-ever heist. Around $600m worth of cryptocurrency was stolen from users of Poly Network (cross-blockchain platform). However, a strange twist is the hackers’ prompt return of roughly half of their loot one day later.

Content source: Finimize (2021) Coinboom And Coinbust. Available at: https://www.finimize.com/wp/news/coinboom-and-coinbust/ [Accessed on Aug 13, 2021]