Hello readers,

In 2021, retail trading accounted for 88% of Coinbase’s top-line revenue. Last year, that figure fell to 48% as the company diversified into subscriptions, services, and institutional infrastructure.

In this week’s edition of The Watch List, we analyze Coinbase’s ongoing transformation and what it means for the company’s earnings power, competitive positioning, and long-term valuation.

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2021-2025 Revenues

Transaction Revenue

Visualizing the mix:

Transaction Revenue Key Takeaways

1. Retail dominance is slowly fading. Retail trading made up 95% of transaction revenue in 2021 and 88% of total top-line revenue. In 2025, it was down to 82% of transaction revenue and 48% of total top-line revenue.

2. Institutional trading is growing in share. In 2025, it accounted for 12% of total transaction revenues, up from 5% in 2021.

3. Other Transaction Revenue now makes up 6.2% of total transaction revenue. This is primarily Base L2 sequencer fees and payments revenue — a new line item that didn’t exist prior to 2023.

4. The revenue mix is becoming more resilient. When retail trading slowed in ‘22, Coinbase lost almost all of its revenue. Today, there are three contributing lines instead of one, helping to smooth cyclical revenues in bear markets.

5. However, transaction revenues have not recovered to 2021 levels. In fact, 2025 transaction revenues were down 40% compared to 2021 (due to retail trading revenues dropping 48%).

Subscription & Services Revenue

Visualizing the mix:

Subscription & Services Revenue Key Takeaways

1. The segment as a whole has grown 5.5x over the past 4 years — a 53% CAGR. Most notably, it grew every year, even during the 2022 bear market.

2. Stablecoins are now the single largest revenue line in this segment, growing to $1.35b in 2025 — a 52x increase over ‘21 and 19% of 2025 total top-line revenues. These revenues come from Coinbase’s partnership with Circle (USDC), under which Coinbase receives 100% of all USDC revenues on the Coinbase platform (exchange, prime, custody services). Coinbase also receives 50% of the “residual” reserve income on all USDC held off-platform (other exchanges, DeFi, wallets, etc.). In case you’re wondering, yes, Coinbase gets more than half of Circle’s revenue via this partnership.

3. Staking revenues peaked in ‘24 at $706m and were down 4% in ‘25. We think this largely stems from the growth of DeFi and a significant decline in ETH staking rewards.

4. Subscription revenues (Coinbase One) were up 96% in 2025 and now make up for 7.7% of top-line revenue. Coinbase One now has over 1 million subscribers, generating recurring, SaaS-like revenues. Please note that custodial fee revenue was moved into this line item starting in 2025.

5. In total, Subscriptions and Services now make up 41% of Coinbase’s top-line revenue. These revenues are recurring, less volatile, and growing. A nice offset to the declining (and more volatile) retail transaction revenues.

When you add it all up, Coinbase's revenues were up 9.4% in ‘25, but down 6.4% from peak revenues in 2021.

2021 - 2025 Operating Expenses

Visualizing the mix:

Operating Expense Key Takeaways

1. Coinbase was on a path to going broke in 2022 when operating expenses hit $5.9b on just $3.2b of revenue. The company was burning cash at an alarming rate, with Tech & Dev alone at $2.3b and G&A at $1.6b.

2. This was resolved when they cut OPEX by 45% in 2023 after restructuring the workforce (laying off 950 employees), overhauling the hiring process, and refocusing on core products.

3. Operating Expenses are now back to ‘22 levels, but the business is 2x larger today and has turned an operating deficit into operating leverage. Coinbase’s operating margin in 2025 was 21%.

4. 17.7% of OPEX comes from transactions — a variable cost that scales with the business. 18.4% comes from Sales & Marketing — a growing line with Coinbase spending heavily on USDC rewards to grow on-platform balances, NBA sponsorships, and Coinbase One growth.

5. The remaining 57.3% comes from Tech & Development (up 13.8% in ‘25) and G&A (up 24.6% in ‘25). Given that revenues are expected to decline in ‘26, we think Coinbase may look to trim headcount once again to reduce overhead costs during the bear market.

2021 - 2025 Balance Sheet

Visualizing the balance sheet:

Key Takeaways:

1. Debt: $1.27b matures in June of this year. Roughly 40% of the total $7.7b is convertible to COIN stock and carries 0% interest. Meanwhile, another $1.26b due in 2030 has an interest rate of just 0.25%. Annual cash interest expense on existing debt is roughly $65m (less than 1% blended rate). For context, Coinbase earned $297m in corporate interest and other income in 2025 alone, meaning their interest income on cash exceeds their interest expense by roughly 4.5x.

2. Non-debt liabilities: $6.2b of the total $7.2b are “pass-through” items with offsetting assets on the other side of the balance sheet (customer custodial fund liabilities and obligations to return collateral). The remaining $1b are current liabilities related to accounts payable and operations.

3. Assets: outside of cash (largest position ever), Coinbase has $4.2b of Goodwill related to its Deribit acquisition, $2b in crypto assets (BTC & ETH), $623m in strategic investments (including Circle stake), and $310m in marketable investments. $3.3b represents operating assets (receivables, lending, equipment).

4. The most significant change to the balance sheet in 2025 came from the acquisition of Deribit (a leading derivatives exchange). Goodwill jumped from $1.1b to $4.2b, and intangibles jumped from $47m to $1.4b as a result of the transaction.

5. Overall, Coinbase’s balance sheet is the healthiest it’s ever been. The company’s net cash position of $3.6b, before accounting for $2.9b in crypto and strategic assets, means it has plenty of runway to weather a downturn, acquire strategic assets, and invest in new product lines. Furthermore, its debt structure is remarkably cheap.

Competition

COIN vs HOOD

When we think about Coinbase’s competition, our focus turns to Robinhood. Both companies are founder-led. Both launched around the same time (2012 for Coinbase, 2013 for Robinhood). Both are serving millennials and Gen-Z. And both firms are building on crypto rails.

We think both companies have an opportunity to reach a $1 trillion valuation and become leading financial institutions of the future.

Valuation Comp to HOOD

Key Takeaways:

1. Both stocks trade at nearly identical 37x trailing earnings. But that’s where the similarities end. On almost every other metric, COIN trades at roughly half the price of HOOD. The market is telling us it values Robinhood’s earnings quality and growth trajectory far more than Coinbase’s, dollar-for-dollar.

2. Why? Margins. Robinhood’s 47% operating margin and 42% profit margin are more than double Coinbase’s (21% and 18%). This led to 45% more operating income ($2.09 vs $1.44) on 35% less revenue for Robinhood.

3. Two caveats: Coinbase’s 2025 operating expenses include $345m related to a data breach incident and meaningful Deribit integration costs that are arguably non-recurring. Furthermore, Robinhood’s operating expenses jumped 38% in Q4 (Y/Y) due to increased marketing and acquisition costs. Generally speaking, Robinhood’s cost discipline is more meaningful than Coinbase's. They're running a leaner operation relative to the revenue they generate. We think this comes down to focus and distribution. Robinhood serves retail customers in the millennial and Gen Z cohorts. Meanwhile, Coinbase is trying to serve both institutional and retail segments, broadening its product lines and incurring higher operating expenses as a result.

4. Cash. Coinbase holds $11.3b in cash (nearly 3x Robinhood's $4.3b), plus $2.0b in Bitcoin and $623m in strategic investments — totaling $14.1b in available resources, providing a multi-year survivability cushion through any crypto downturn.

5. Debt. The vast majority of Robinhood’s debt ($11.8b vs. $ 7.7b for Coinbase) is operational brokerage debt (securities loans matched by borrowed securities and user margin receivables). Robinhood actually has zero long-term corporate bonds outstanding, so its corporate debt is essentially zero. Coinbase carries $7.7b in debt across six tranches of convertible and senior notes, but at a very low blended rate of 1%.

6. Buybacks. Robinhood started buying back shares in Q3-24 and has been aggressive in doing so. They’ve now repurchased $910m worth of shares at an average price of $40.64. $100m was purchased in Q4 at an average cost of $119.86. Coinbase began buying back shares in 2025, purchasing $408m worth. In their 2025 shareholder letter, they indicated they will be opportunistic during the bear market. At the same time, Brian Armstrong (CEO) has been selling his founder shares, attracting negative attention and poor optics. In total, Armstrong has sold roughly $550m in shares between April ‘25 and January ‘26 (more than the company buybacks). This represents roughly 3.3% of his shares, while he still holds roughly $7.5b in shares (we think he’s sold roughly 10% of his total holdings since 2022). As noted, it's bad optics, but we think the market is overreacting. Why? This is standard practice for a tech founder whose net worth is largely tied up in the company he founded. The sales were pre-planned. And they represent just 3.3% of his holdings. The optics aren’t great, but this is not a big red flag in our opinion.

Risks

• Competition. Its intensifying on multiple fronts. . Traditional brokerages are expanding their crypto offerings (Schwab, Fidelity). Binance dwarfs Coinbase on the international stage. And BlackRock, Fidelity, Galaxy, and others are building competing infrastructure for institutional clients.

• Regulation. Coinbase is currently playing a key role in the Clarity Act negotiations. If new rules tilt the playing field toward incumbents and away from crypto-native services, this could materially impact Coinbase’s business.

• Cyclicality. Despite all the progress in diversification, 59% of revenue is still transaction-based and directly tied to crypto prices and market sentiment.

• Interest rates. Stablecoins now make up 19% of top-line revenues. If the Fed cuts rates materially, this will have a direct impact on these revenues. This is something Coinbase flagged in its Q1-26 guidance, which guided anticipated revenues down by $100 - $150m.

• Security and data breaches. The May 2025 incident cost the firm $345m and some serious reputational damage.

• Concentration risk with Circle. It’s possible the GENIUS Act could make this relationship illegal—an underreported risk (and one we think the banks are pushing for). The argument here is that Circle’s payments to Coinbase for stablecoin distribution could violate Section 4 (a) (11) of the GENIUS Act, which prohibits paying interest to stablecoin “holders.” The legal question here hinges on whether Coinbase (as a custodian of its users’ USDC) qualifies as a “holder.” We think it does not, but investors should keep an eye on this. Coinbase’s agreement with Circle auto-renews every three years unless one of two things happens: 1) the agreement is deemed illegal under applicable law, or 2) both parties mutually agree not to renew.

Closing Thoughts

Despite a challenging Q4, Coinbase's underlying business is structurally stronger than in prior cycles. The firm has $11.3b in cash on hand, a $2.8b subscription and services revenue base (41% of top-line revenue), and dominant positioning in institutional custody and stablecoin infrastructure.

Meanwhile, COIN trades at roughly half of Robinhood's valuation on P/S, P/B, and EV/EBITDA. Given its stronger balance sheet, we think COIN can offer a compelling risk/reward for investors with conviction in the long-term growth of crypto capital markets.

We exited the majority of our COIN position in Q3/Q4 of last year (270% gain). But still hold shares at an average entry of $99.58 and are looking to add more.

If you’d like to be notified if/when we add COIN to our active portfolio (or any other assets), you can subscribe to TDR Pro here.

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Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.