In Base’s application activity, the DeFi category stood out, with address activity growing significantly from 143,600 in Q2 2024 to 405,700 in Q3.
Written by: insights4.vc
Compiled by: TechFlow
Between November 5 and 6, Coinbase Global (NASDAQ: COIN) shares rose 31% from $193.96 to $254.31 in response to the election results. This report provides an in-depth analysis of Coinbase’s current financials and the performance metrics of its Layer 2 blockchain, Base.
Coinbase (COIN) Closing price: $254.31 | Volume: 35.46 million - November 6, 2024
Coinbase Competitors: Key Metrics at a Glance
Revenue Analysis
Revenue Breakdown (Q3 2020 - Q3 2024)
income
Total revenue for the third quarter of 2024: $1,205.2 million, down from $1,449.6 million in the second quarter of 2024, but up from $772.5 million in the third quarter of 2023.
Revenue Trends: After peaking in the fourth quarter of 2021, total revenue has stabilized but remained at a lower level since the second quarter of 2022.
Revenue by Segment
Consumer Transactions: $483.3 million in the third quarter of 2024, down from $664.8 million in the second quarter, showing sensitivity to market fluctuations, but still a major source of revenue.
Institutional trading: decreased slightly to $55.3 million from $63.6 million in the second quarter of 2024, with less volatility but contributing a lower percentage of revenue.
Blockchain Rewards: $154.8 million in the third quarter of 2024, which is lower than $185.1 million in the second quarter, but an increase year-on-year, providing a stable income related to blockchain development.
Stablecoin revenue: $246.9 million, which remained stable across quarters, showing the important role of Coinbase in the digital currency field.
Interest and finance charges: $64 million in the third quarter, providing a steady stream of revenue despite market changes.
Subscriptions and Services: $556.1 million in the third quarter, down from $599 million in the second quarter, indicating growth in services but impacted by current market pressures.
Cost Analysis
Transaction fees: $171.8 million (15% of net revenues), down 10.3% from the second quarter of 2024.
Technology and development: $377.4 million, up 3.6% sequentially.
Sales and Marketing: $164.8 million, down slightly by 0.3%.
General and administrative: $330.4 million, up 3.2%.
Other operating net income: -$8.6 million represents net income for this category.
Total operating expenses: $1,035.7 million, down 6.4% from the second quarter of 2024.
Trading volume and asset income contribution
Total transaction volume in Q3 2024: $185 billion, down from $226 billion in Q2 2024 and down from $92 billion in Q3 2023.
Consumer transactions: $34 billion, down from $37 billion in the second quarter of 2024.
Institutional transactions: $151 billion, down from $189 billion in the second quarter of 2024.
Asset income details
Bitcoin: 37% of total volume, up from 35% in Q2 2024.
Ethereum: Volume remained stable at around 15%, showing steady market interest.
Note: Solana has been highlighted as the third-largest asset in the past two quarters, increasing its share of total transaction revenue from 10% to 11%.
Other assets: Falls to 33% in Q3 2024, reflecting diversification efforts, but the focus remains on Bitcoin and Ethereum for now.
Resource allocation and investment analysis
Liquidity Overview
USDC holdings: $508 million in Q3 2024, down slightly from $589 million in Q2 2024. This suggests that USDC remains a steady source of liquidity, and a reduction could indicate strategic asset redeployment.
Company cash held with third-party institutions: $92 million, slightly lower than the previous $97 million, indicating the minimization of third-party risk.
Money Market Funds and Government Bonds: Increased to $6.088 billion, up from $4.068 billion in the third quarter of 2023, indicating a conservative shift toward lower-risk, liquid financial instruments amid market volatility.
Company Cash: Decreased to $1.544 billion from a peak of $3.549 billion in the second quarter of 2022, likely due to a decrease in strategic investments or operational needs.
Total Liquidity Resources: grew to $8.232 billion in the third quarter of 2024, demonstrating a solid financial foundation and readiness to respond to strategic opportunities or market downturns.
Investing and financing activities
Operating Cash Flow: $687 million in the third quarter of 2024, demonstrating the company's strong ability and resilience to generate cash in its core operations.
Capital expenditures: only $19 million, reflecting a conservative approach to fixed costs to support financial flexibility.
Strategic investments: Smaller outflows, including $14 million in venture investments (details of Coinbase Ventures’ activities are available in Google Sheets), $18 million in crypto investments, and $173 million in fiat loans and collateral, highlighting prudent risk management.
Financing Activities: No new long-term debt was issued in the third quarter of 2024, reflecting the strategic focus on organic growth and internal use of liquidity.
Workforce indicators and other data
Total headcount in Q3 2024: 3,672, up from 3,486 in Q2 2024.
Monthly active users (MTUs): 7.8 million, down 4.9% from the second quarter of 2024 and down 16.4% year-over-year.
Website traffic: Decreased to 37.8 million in the second quarter of 2024 from 40.7 million, possibly reflecting waning interest or seasonal changes.
Google Trends: Peaked at 74 in September, showing fluctuations in public interest.
App downloads: Decreased from 14,189 in August to 8,928 in September, indicating a slowdown in new user acquisition.
Job postings: fell to 818 in October, possibly indicating stabilization of hiring or ongoing restructuring.
Financial Ratios
Note: The following explanations provide insights based on current data and are not final. Independent review of the data is recommended and detailed data can be found in Google Sheets.
Financial Ratios (2020 - 2023; Q3 2023 - Q3 2024)
Liquidity Analysis
Current Ratio (Q3 2024: 1.03): Remains stable, indicating limited coverage of liabilities by current assets.
Operating cash flow to current liabilities ratio (Q3 2024: 0.0025): slightly increased, indicating a partial recovery in cash flow generation capabilities.
Cash Ratio (Q3 2024: 0.03): Maintained at a low level, highlighting the strict requirements for cash management.
Leverage Ratio
Debt-to-Equity Ratio (Q3 2024: 32.29): High leverage indicates increased financial risk.
Debt Ratio (Q3 2024: 0.97): Liabilities are almost equal to assets, indicating a high reliance on debt.
Interest Coverage Ratio (Q3 2024: 8.09): A positive value indicates that operating income is sufficient to cover interest expenses, reflecting good debt repayment capacity.
Profitability and efficiency ratios
Net Profit Margin (Q3 2024: 6.26%): Improved from a loss in Q3 2023, showing improved net income generation capabilities.
Return on Assets (ROA) (Q3 2024: 0.03%): Asset utilization is low, indicating possible operational efficiency issues.
Return on Equity (ROE) (Q3 2024: 0.86%): Although it has improved slightly, it is still low, indicating that the return on shareholders' equity is not ideal.
Gross profit margin (Q3 2024: 71.00%): Improved, demonstrating effective cost control.
Operating profit margin (Q3 2024: 13.78%): Significant improvement, indicating more effective control over operating expenses.
Market performance ratio
Earnings per share (EPS) (Q3 2024: $0.28): Recovered from negative earnings, showing strengthening profitability.
Price-to-Earnings (P/E) Ratio (TTM Net EPS) (Q3 2024: 31.93): The moderate P/E ratio suggests that investors are cautiously optimistic about the future.
Base
For more information on Base’s origins and development, see our June newsletter. Led by Jesse Pollak, Base officially launched on July 13, 2023.
Overview
Platform Mission: Base is Coinbase's Layer 2 solution on Ethereum, aiming to create a global on-chain economy that prioritizes innovation, creativity, and economic freedom, and provides a safe and low-cost environment for the development of decentralized applications (dApps).
Infrastructure and Governance: Base is built on the OP Stack for scalability and cost-efficiency. Base has confirmed that it will not issue a native token (as stated by CEO Brian Armstrong on December 1, 2023). Base is working with OP Labs to actively develop decentralized governance and research projects, including EIP-4844 and the op-geth client, in line with Coinbase's vision of gradual decentralization.
Ecosystem Development: Base is widely welcomed in the developer community and focuses on substantive product innovation rather than relying on token incentives. Coinbase's internal team uses Base to deploy smart contracts, improve the product experience for consumers and institutions, and promote the popularization of on-chain applications through easy onboarding and intuitive interfaces.
Core products: Base is positioned as a decentralized "app store" that provides an open platform for developers, including the Base name to simplify on-chain identity management, and a smart wallet to provide users with a secure and programmable asset management solution.
Strategic Positioning: Base is not only competitive in the Layer 2 ecosystem, but also competes with traditional online platforms by providing an on-chain experience comparable to traditional Web applications.
Key Metrics
Among Base’s application activities, the DeFi category performed prominently, with address activity growing significantly from 143,600 in the second quarter of 2024 to 405,700 in the third quarter. However, revenue fell to $7.3 million in the third quarter, down from $24.2 million in the second quarter. Stablecoin transfer volume has grown significantly, from $97.8 billion in the second quarter to more than $415 billion in the third quarter, demonstrating rising transaction demand. The ratio of new users to returning users has also changed: 107,000 vs. 278,000 in the second quarter, 420,000 vs. 450,000 in the third quarter, and 509,000 vs. 827,000 in the fourth quarter. Sybil addresses decreased to 178,000 in the fourth quarter, while non-Sybil addresses reached 1.2 million, with 550,000 Sybil addresses and 320,000 non-Sybil addresses in the third quarter.
As we can see in the chart, Base is the leading Layer 2 blockchain as of November 7. It surpassed Arbitrum in total value locked (TVL) a few weeks ago and has maintained its position as the number one Layer 2 in both the daily active addresses and daily transactions categories for several months in a row.
Total value locked in smart contracts (in millions of USD)
Daily active addresses (number of unique on-chain wallets interacting with the protocol per day)
Transactions per day (number of unique on-chain interactions with the protocol)
