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Coinbase has filed its SEC filing, the first steps in launching its IPO. Here’s what we’ve learned from the filing so far.

1. Revenues and earnings are growing fast

Total revenues rose to $1.3bn in 2020 from $533k in 2019, while net income rose to +$322k last year vs a loss of $30k in the prior year. The number of users has risen to 43m.

2. Earnings are volatile

The company says that revenues have and will significantly fluctuate due to the highly volatile nature of crypto and what it calls the ‘cryptoeconomy’. “All of our sources of revenue are dependent on crypto assets and the broader cryptoeconomy. Due to the highly volatile nature of the cryptoeconomy and the prices of crypto assets, our operating results have, and will continue to, fluctuate significantly from quarter to quarter in accordance with market sentiments and movements in the broader cryptoeconomy,” the filing states. For example, the average three-month Crypto Asset Volatility increased by 73% from the fourth quarter of 2019 to the first quarter of 2020, before decreasing by 36% from the first quarter of 2020 to the second quarter of 2020.

3. Earnings are inextricably tied to crypto prices.

This may be obvious, but it interesting to see in black and white. “Our total revenue is substantially dependent on the prices of crypto assets and volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected.”

4. More than anything it’s highly dependent on Bitcoin.

A majority of Coinbase’s net revenue is from transactions in just two crypto assets: Bitcoin and Ethereum. For year ended December 31, 2020, Bitcoin, Ethereum, and other crypto assets represented 70%, 13%, and 13% of assets on the platform respectively. “If demand for these crypto assets declines and is not replaced by new demand for crypto assets, our business, operating results, and financial condition could be adversely affected,” says the filing.

5. Institutional interest is rising.

Whilst we know this is the direction of travel – we have seen Square, Tesla and MicroStrategy invest in Bitcoin and the likes of PayPal and Mastercard announce plans to support crypto payments, the filing further underscores growing institutional interest. “More recently, we have experienced significant growth in the number of institutions on our platform, increasing from over 1,000 as of December 31, 2017, to 7,000 as of December 31, 2020,” the filing says.

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