The shares of cryptocurrency exchange Coinbase (COIN) managed to see a small uptick as it reported net income above Wall Street estimates. However, the shares are still trading at $265.10, still down over 38% from the opening day ATH of $429.54. Nic Carter, founding partner at Castle Island Ventures in an interview with Bloomberg said,

“Coinbase is a very straightforward business. Their revenues are very much a function of retail trading volumes, and those have been strong,” and with not much changed there, “pretty much delivering exactly as expected.”

“Of course, the price performance has been somewhat disappointing, and its tracks sort of the broader crypto markets but not a lot of surprises there.”

Coinbase reported total sales of $1.8 billion, in line with its April guidance with its net income at $771 million.

In its shareholder letter, Coinbase yet again emphasized that its business “is inherently unpredictable,” adding, “the wind is in our sails right now, and it feels good.”

The total cryptocurrency market cap has grown from a meager $125 billion in March 2020 to $2.4 trillion now, with cryptos hitting new all-time highs every other day. Chief Financial Officer Alesia Haas said,

“This is a long-term investment. We believe that we are just starting to get to the potential of crypto, but it could be a bumpy journey, and we could see days that are up and down like we have seen in the past.”

In an interview with CNBC, Haas said, “the first coin that people are interested in is bitcoin,” but other crypto assets are seeing increasing volume.

The company increased its expectations of the full year for monthly transacting users as they rose to 6.1 million in Q1. While Coinbase expects its total trading volume to either meet or exceed quarter first numbers slightly, they “seek to operate the company at roughly break-even in terms of profitability, smoothed out over time, for the time being.”

Yet again, Coinbase said, it “substantially” increased marketing this year, with investments in sales and marketing adding up to 12%-15% of revenue.

Coinbase had $2 billion in cash and equivalents at the end of the quarter.

Most of Coinbase's revenue comes from retail users, even though institutions are the ones accounting for most of its assets under management. The company is actually trying to bring in institutional money to later offer more services to larger customers, said Haas.

The exchange is exploring new services and planning to add more features to its app, allowing for easy NFT trading.

In terms of risk factors, Coinbase pointed to rising competition and how they are supporting certain cryptos with large trading volume and growth in market cap that Coinbase currently doesn’t support.

“We are slow. We need to add more assets. We’re making big investments to improve the speed of our asset addition, but clearly, the market is speaking,” said Haas. Meanwhile, Nic Carter says,

“What I'd like to see would be if they can diversify their revenue a little bit and build in more lines of revenue mirroring the way that conventional exchanges operate. They tend to have larger data businesses. Few crypto exchanges monetize their data. And seeing if Coinbase can maybe monetize their value on a net interest margin model, perhaps which they haven't done so far. So they still have plenty of room for growth.”

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