The diversified strategy of revenue generation adopted by Coinbase is producing positive results for the COIN stock.
Indeed, in its most recent quarter, Coinbase reported higher profits from subscriptions and services than from traditional transaction fees.
Let’s look at all the details below.
Summary
How Coinbase’s COIN stock is thriving
Despite analysts’ predictions of a difficult period, Coinbase’s quarterly financial results surprisingly exceeded expectations, thanks to a restructuring of its revenue generation strategy, in the words of Mike Ippolito.
Recently revealed in the second quarter earnings report, it emerges that subscriptions and services contributed 51% of total revenue. During the Bell Curve podcast (available on Spotify/Apple) Ippolito said the following about this:
“Contribution from subscriptions and services even exceeded that from transactions, as second-quarter transaction revenue was down 13% from the prior quarter.”
Ippolito recalled Coinbase CEO Brian Armstrong‘s words from last year when he anticipated a change in the revenue model, stating the following:
“Eventually, subscriptions and services will make up a sizable portion of our revenue. And they have kept their promise, obtaining excellent results.”
Michael Anderson, co-founder of Framework Ventures, was also surprised by the success of the subscription model, explaining the following:
“Predictable revenue growth is what the financial market values. The key to a successful business, with stable revenue growth, is something that doesn’t rely solely on transactions.”
Anderson also pointed out that competitors’ transaction fee-based models often end up in a “race to zero,” noting that transaction volume is inherently “highly cyclical.”
The subscription model: the key to Coinbase’s long-term success
Not only that, Anderson also stated:
“Considering the cyclicality of the cryptocurrency market, which appears to follow a cycle of about three to four years, transaction revenues follow this same up-and-down trend.”
Thus, the shift to a subscription and service-based model is of “critical importance” to Coinbase’s long-term success.
Anderson adds that revenues from staking have surprised positively:
“The current target for the amount of ETH being staked is surprisingly higher than everyone’s expectations.”
We recall that at the time of the Ethereum Merge, concerns were circulating about a potential “large influx of ETH for withdrawal,” about which Anderson explained:
“In reality, in the last two months, the waiting for withdrawals has been practically non-existent and the queue to become a validator has been around 60,000-80,000 positions waiting, which corresponds to about a month.”
Finally, Anderson predicts that the amount of ETH earmarked for staking will continue to grow:
“I wouldn’t be surprised if we ended the year with around 30-40 million ETH staked.”
In addition, Anderson anticipates that federal interest rates will maintain higher levels for an extended period. This factor gives Coinbase’s USDC a solid foundation to continue generating interest income.
Anderson expects Coinbase to continue to “excel” at generating income from interest, which he says gives them enough time to accumulate blockchain rewards, custody fees, and other subscription income.
The Level 2 platform, Base, is also attracting attention currently, Anderson says:
“Few fully understand the implications of owning a proprietary blockchain that generates revenue, and that people actually want to use.”
Asset transfer: Voyager Digital entrusts its assets to Coinbase
In accordance with what Etherscan reported on 11 August, the struggling cryptocurrency lending company, Voyager Digital, recently executed a transfer of 1,500 Ether within the Coinbase platform, generating an approximate value of $2.77 million.
In parallel, an amount of approximately 250 billion SHIB tokens was also routed to the well-known exchange. These movements have sparked speculation in the cryptocurrency landscape, giving room for different interpretations.
Specifically, one of the suggested hypotheses concerns a possible liquidation of assets. Also of note is the fact that these transactions have been broken down into one-hour time intervals.
This abrupt shifting of tokens has raised speculation of a possible forced disposal. However, other circumstantial rumors indicate that Voyager is centralizing its tokens from different addresses to a main one.
These shifts have aroused interest throughout the ecosystem, thanks in part to on-chain analysis initially shared by Colin Wu, a well-known industry journalist.
As we know, since the beginning of 2023, Voyager has been gradually liquidating its SHIB asset position, giving substance to speculation of a pending sale.
Specifically, 270 billion SHIB tokens, equivalent to $3.2 million; 4.9 million Voyager Token (VGX) tokens, valued at $2.1 million; 3,050 ETH tokens, valued at around $3 million; and 221,000 Chainlink (LINK) tokens, with an estimated value of $1.5 million, have been moved.
